Market pundits, average investors and analysts expressed a mixture of excitement and skepticism as the Dow Jones industrial average closed above the 10,000 mark for the first time since Oct. 3, 2008.
American and world stock markets have witnessed a turbulent 18 months as markets worldwide lost close to half their value between October 2007 and March 2009. Markets have significantly rebounded throughout the summer and fall of 2009. The Dow Jones industrial average hit its high above 14,000 in October 2007. It slid below 10,000 in October of last year before bottoming above 6,600 in March 2009.
“We think everyone is expressing relief as the markets continue an upward trend,” said GuideStone Financial Resources President O.S. Hawkins. “While we do not know when they’ll regain all of the value lost since October 2007, we know that markets are cyclical and that if history is any guide, they will eventually return to pre-recession levels.”
Skepticism has been expressed by some that this market recovery will be short-lived. Many pundits have reduced the question of the economy’s recovery to a series of letters to describe the “shape” of the recovery. A “V-shaped” recovery would include a deep drop, followed by a steep climb. A “U-shaped” recovery would be a steady drop, followed by a slow climb. And a “W-shaped” recovery would have a drop, followed by a steep climb, followed by another drop and then growth. The “W-shaped” recovery is sometimes referred to as a “double-dip.”
“While guessing the market’s direction, or the shape of its recovery, is the meat and potatoes of cable news and finance channels, long-term investors — as we encourage our retirement investors to be — should instead focus on long-term investing principles,” Hawkins said.
Those principles include making regular contributions to your retirement account, making sure you are contributing enough and investing in an appropriate asset allocation based on your risk tolerance and time horizon. GuideStone offers helpful calculators on its MyGuideStone online service (www.MyGuideStone.org) to help its participants gauge their retirement investments and determine if they are on track with their retirement investments.
“Many investors who fled the equity markets near the bottom in March of this year have missed the growth in the market since then,” Hawkins emphasized. “This is commonly referred to as ‘locking in your losses’ and is something less likely to occur to those who don’t let short-term market swings impact their decision-making.
“Whether the stock market continues on its upward climb or if it meanders near 10,000 for weeks or months or if it drops again, it’s important to remember that while historic trends are no guarantee of future results, the market has rewarded those investors who develop a plan and stick to it,” Hawkins said.
For more information about GuideStone, call 1-888-984-8433. (GuideStone)
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