Over the month of January, the Dow Jones Industrial Average dropped nearly 1,000 points and the Nasdaq Composite Index dropped by around 100 points. On Monday, markets took a hit once more as the Dow dropped over 300 points. In the wake of January’s monthly job report, which will be released by the U.S. Bureau of Labor Statistics this Friday, financial analysts and advisors suggest there is no cause for concern with the recent volatility of markets.
“This is normal,” said Cami Plaisted, a Financial Advisor for Edward Jones, one of the largest financial services firms in the United States. “Investors should stay calm and take time to review their financial goals. By going over investment objectives, tolerance to risk in the market, and portfolio allocation (to make sure someone doesn’t have too many eggs in one “investment” basket), I am able to help clients determine the appropriate mix of investments they need to keep their long term financial goals on track and not let short term market movements derail their investment strategies” said Plaisted in response to concerns that investors may have.
Dr. Kate Warne, Ph.D., CFA, is the Principal of Research and Investment Strategist in the Edward Jones Research Division. She suggests there are a few reasons why stocks dipped lower in January than expected. “Worries about slower economic growth, political unrest and currency declines in several emerging markets pulled U.S. stocks lower in January, despite solid earnings reports from major U.S. companies,” writes Dr. Warne of the decline. She suggests that there are signs pointing to earnings and economic growth improvement and stock growth including economic growth at an annual rate of 3.2% in the fourth quarter, despite a partial government shutdown. Additionally, consumer spending rose higher than expected in both November (0.6%) and December (0.4%), suggesting that small business and consumer confidence has risen over that period. With the large increase in stocks over the year 2013, Dr. Warne and other economists expected a slight downturn in the market to begin 2014.
If you have questions about your portfolio and would like a free financial consultation, click here to visit Cami Plaisted with Edward Jones. Or click here to visit Jeff Gower, another Financial Advisor with Edward Jones.