Stock Market See-Saw

Yesterday, I wrote about how the stock market plunge in China and the subsequent drop in the U.S. markets was not something anyone other than short-term investors should be worried about. Typically, I wouldn’t write another article about the stock market again right away, because I believe that most people would be better off watching the markets less, rather than more.

But, I couldn’t resist today. Yesterday, there was an article that included the word “Bearmageddon” suggesting that a bear market of armageddon-like proportions was in the offing after the U.S. markets closed down six-days in a row. Other articles couldn’t stop pointing out thing like the biggest drop ever, or the longest-streak of down days since whenever, and so on.

Today, the markets closed up. The stories today are about the “biggest gain in almost 4 years.”

Talk about whiplash.

The reality is that the U.S. stock market trades, in the long-term, based upon the fundamentals of the United States’ economy. While it is true that the issues in other countries, like China, can inform potential issues in the U.S. economy, it is important to remember that those issues must be American issues, not Chinese issues.

The truth is that the Chinese economy could crater into a mass recession without necessarily taking the U.S. with it. In fact, thanks to China’s restrictive business policies, American company’s exposure to China is often comically limited, often by a force partner from China itself. While reduced demand from China wouldn’t be anyone’s first choice, the reality is that few company’s count on China for a large portion of their revenues. Even the short-lived concern about iPhone sales in China is probably a small factor to Apple if sales held steady or increased elsewhere.

The point is, that like always, the media love to shout attention grabbing headlines. But, in a year, will this be the beginning of a market correction, bear market, or just a few days of crazy volatility?

The Dow’s 619 point rise today wipes out yesterday’s 200-ish point decline and then some. Who was right, yesterday or today?

It really doesn’t matter compared to who was right last year, or the last five-years?

 

 

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