Mr. Market's Mood Swings

Woke up to see the Dow down more than 1.5% last night. This doesn't seem out of the normal as it's been happening a few times in the past month. The reason seems perplexing though, the jobs data released in the US is positive with unemployment at a low since April 2008, back to the most recent recession.

(Image source: https://en.wikipedia.org/wiki/Mood_swing#/media/File:P_culture.svg)

So how does a positive jobs report lead to a drop in the stock market? People are thinking that the Fed may increase interest rates and this job report makes this more likely. Last week the market went up due to the idea that the Fed may delay the interest rate hike, but people are now believing there's a possibility that it's back on due to the positive jobs report.

This shows that Mr. Market's mood swings can be extremely sudden and the same piece of news can be interpreted very differently at different times as well. A while back, the interest rate hike was thought to actually help increase the profits of the banks, while an interest rate hike now is likely to drive it's prices lower.

This may be a self-fulfilling prophecy. People think the market is going to go down, so it actually does, which reinforces people's fears. Or this could investors could just be jittery during this period so they focus on the negatives of any news coming out. Whichever the case, there's a possibility for many good buying opportunities if the market either drops or remains volatile (just don't mistake volatility for risk)

In other news, I've started reading Security Analysis. It's super thick.......

If you have enjoyed this post and would like to receive notifications on new posts, you can subscribe to my blog via email or like our Facebook page