A last-minute rally saved the Dow Jones Industrial Average from a loss of nearly 1,000 points on Monday, but the index ended up losing more than 600 points as it followed overseas markets worried about the company Chinese real estate riddled with Evergrande debt.
Ken Kamen, president of Hamilton-based Mercadien Asset Management, called Evergrande “an excuse of the day” and said the US stock market was still less than 5% of its all-time high.
That might be a better position than anyone could have predicted on January 1 of this year, as the 11th month of the COVID-19 pandemic approaches, with vaccines just starting to be made available to the first eligible tier.
“The fact that the market has behaved so well and we are resuming operations, I think people must have wondered, at some point, that the market needs to catch its breath,” Kamen said. “Corporate earnings always look good, the economy always look strong, the consumer is definitely strong, so I think people should look at it and take it with enthusiasm, to say, ‘OK, it’s one of those times when it’s just part of the investment. ‘”
In addition to the Dow Jones 614 point loss, down 1.78% to close at 33,970.47, the S&P 500 finished down 75.26 points on Monday (minus 1.70%), closing at 4,357.73, and the Nasdaq composite lost 330.06 (minus 2.19%), ending the day at 14,713.90.
It was all the worst day for stocks since May, but Kamen said it was more of a concern for day traders, not long-term investors with diversified portfolios.
“If you have a good basket of stocks and you are well diversified, you should expect these market reversals,” he said. “In fact, they should be in your game plan. You should already have stress tested your portfolio. “
Going forward, the Federal Reserve is expected to announce this week that it will withdraw its removal of interest rates as a pandemic coping mechanism.
Wall Street is also keeping a watchful eye on Congress, which continues to define the intricacies of a potentially costly Biden administration infrastructure plan.
But for now, Kamen has said Monday’s stock market activity, while shocking, is normal.
“People forget that corrections are part of the normal market, even though we haven’t seen a 5% correction for a long time, let alone a 10% correction,” he said. “So part of it was because a correction was overdue.”
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