Dow Jones spirals amid Coronavirus outbreak
The Dow Jones Industrials saw its worst for the index in two years amid fears of the Coronavirus spreading, threatening to disrupt the global economy. We spoke with Nancy Tengler, Chief Investment Officer at Tengler Wealth Management about the stock market drop and she says it wasn’t as bad as you may think.
“Today is not a plunge, even though it’s 1,000 points.. it’s 3.5 percent.”
She says it was the 225th worst day of percentage returns since 1928 and it’s hardly a disaster when you rank it that way.
“I was not uber concerned, but then this morning we also had the news about Bernie Sanders winning Nevada. The health care stocks, in particular, United Healthcare, really was about 150 to the downside worries he is going to ban private health care.. so that put added pressure,” said Tengler.
She says if you look at previous pandemics, the market has actually gone down, then had a v-shaped recovery. Tengler says it is still too early to tell what may happen down the road with the Coronavirus, but oftentimes, she says the markets will respond to news like the Coronavirus is due to algorithms and the reaction of this data.
“In today’s world, the algorithms, which are computer-driven programs, are responsible for anywhere between 40 to 90 percent of trading volume. So they read the headlines and the selling begets more selling and you see the slides happen pretty quickly.”
Tengler’s takeaway is not to panic, but she does have advice: if you are a 401k investor, you may want to add to your contributions or move money out of bonds into stocks because interest rates have hit historic lows.