Of the Magnificent Seven cohort of stocks, Meta (25% off its highs at one point) has fared the worst, while Alphabet and Apple have proved the most resilient.
These moves will be causing a bit of consternation among investors, particularly those who have entered the fray in recent months.
However, it’s not unusual for markets to experience a sell-off such as this, particularly after such a good run.
For new investors, rough markets can be your friend. These are periods to look forward to, rather than fear.
I don’t know about you, but I’m not a huge fan of buying investments at all-time highs.
I’d much rather put my hard-earned cash to work when prices are 5%, 10% or even 20% lower.
For someone on the cusp of selling their share portfolio for retirement, periods of market weakness can be awful.
If you’ve had that house deposit sitting in a high-growth fund, a portfolio of tech high-flyers or – worse still – crypto, you’ll be a little nervous right now.
The truth is that anyone in that situation should’ve invested much more conservatively.
Growth assets like shares or real estate are only appropriate for your long-term money.
If that’s the case and you’ve got an investment time horizon of five years or more, relax.
In fact, if you’ve got capital to invest or you’re still in the accumulation phase of your investment journey, you should be rubbing your hands together and hoping for more volatility.
You want those next few KiwiSaver contributions to pick up some assets at lower prices, right?
In the past 15 years, we’ve seen nine occasions where the S&P 500 has fallen 10% or more, so they come pretty frequently.
Two of these developed into bigger falls of more than 20%, once during the Covid recession and the other in 2022, when interest rates were rocketing higher from near-zero levels during the pandemic.
Right now, US recession indicators aren’t flashing red, inflation is contained and while the timing is debatable, interest rates are likely to go lower, not higher.
The other seven examples saw an average decline of about 15% and were driven by nervousness over various issues from a Chinese economic slowdown to Donald Trump’s tariffs earlier this year.
The S&P 500 could fall 10% in the coming weeks and months, or it could rebound and recover tomorrow.
Nobody can predict the short-term movements of sharemarkets with any level of certainty.
Besides, the former would simply take us back to where we were in June, which would hardly be a disaster.
If the ups and downs continue, don’t panic, just keep in touch with your investment adviser or your KiwiSaver manager.
They will have navigated periods like this before, probably many times.
They’ll help you stay disciplined, keep your cool and remain on track.
Those nine sell-offs since 2010 have lasted an average of three months, so these periods tend to blow over quickly.
If we do see a bigger correction in the months before, don’t squander it.
Before you know it, you might be looking back and wishing you’d done more buying.
Mark Lister is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.
