Have you noticed how some markets have been gradually coming off the boil, lately? The Dow Jones Industrial Index is about 1.7% lower than a month ago. The FTSE 100 has dropped 1.8% in the last 30 days.
That has rattled some commentators.
Meanwhile, the Hang Seng has lost around 3% in the last month, and it is now in a technical bear market. Closer to home, the Straits Times Index is down around 1.7% over the same period, and Australia’s ASX 200 has lost 1.4% of its value.
Could this be a sign of things to come? Could this mean that the record-breaking run in shares is about to hit the buffers?
Morgan Stanley has said that it is cautious on American stocks that are sensitive to rising interest rates. Others are warning that the economic recovery, which has been fuelled by monetary and fiscal stimulus, could be running out of steam.
It is certainly possible that markets could be heading lower. But is that necessarily such a bad thing? I have never understood why some investors cheer when stock prices are rising but are bitterly disappointed when they fall.
What does it say about us if we are delighted that shares continue to hit record highs? Does it not, somehow, imply that we buy shares only once, and never buy them ever again?
That would be a crying shame because the stock market is such a great place to build our wealth over the long term. The operative phrase being “the long term”. We should be adding money to shares as often as we can.
Consequently, we should be ecstatic when share prices fall. It means that we can buy more of what we like at cheaper prices. And for income investors, it means that we can buy more dividends for less.
Perhaps it is because my brain is wired differently to other investors. But I do get quite excited when commentators warn of corrections and crashes.
However, I can’t help thinking that they could be wrong. There is just too much cash swirling around the global economy for that to happen.
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David does not own shares in any of the companies mentioned.
