Your basketball bracket wasn't the only thing that went sideways in March. The volatility that began shaking up markets in early February has been on a tear since.
Over the week of March 19, the Dow Jones industrial average—an index that tracks 30 large U.S. stocks—sank 5.7 percent, losing more than 1,000 points on Thursday and Friday alone. At the same time, Standard & Poor’s 500-stock index dropped 6 percent, and the Nasdaq fell 6.5 percent.
At times, it's looked like things were starting to turn around, but it's been a choppy ride. For example, the Dow gained 335 points on Tuesday, April 3, before dropping again more than 1 percent Wednesday morning.
What’s behind the bumpiness? Let’s break it down.
On March 22, President Donald Trump signed an executive memorandum to impose tariffs on $60 billion worth of Chinese imports. In response, the Dow shed more than 1,100 points over two days.
This week, China fired back. On April 2, it announced 25-percent tariffs on U.S. pork products and aluminum scrap, plus 15 percent on 120 other U.S. goods, like almonds and berries. Wednesday, officials said they plan to impose tariffs on another $50 billion worth of U.S. exports, including cars and soybeans.
Escalating tensions between the world's two largest economies has investors on edge. On Monday, the Dow shed 432 points, and started down on Wednesday.
2. Facebook (and other tech stocks)
Since March 19, when news broke that data company Cambridge Analytica improperly kept info on millions of Facebook users, Facebook's stock price has dropped about 12 percent—fueled in part by new reports that the FTC is investigating the social media giant's practices. The news also sparked broader concerns about data privacy and technology regulation, which have affected the rest of the tech sector, too.
Amazon's stock price also slumped this week, following new criticism from the president. In recent weeks, Trump has accused the retailer of paying "little to no taxes" and putting thousands of other companies out of business.
3. Interest rates
On March 21, the Federal Reserve, our country’s central bank, announced its first interest-rate hike of 2018 (and sixth since December 2015). Investors more or less expected it—and are prepared for more this year and next. But rising rates mean more expensive debt, which is bad news for businesses and people alike. Plus, Wall Street’s still in the apprehensive, getting-to-know-you phase with new Fed chair Jerome Powell.
4. Continuing political turmoil
As if trade war threats weren’t enough, ongoing firings and hirings at the White House—including adding controversial figure John Bolton as the new National Security Adviser and firing Veteran Affairs Secretary David Shulkin by tweet—continue to fuel market uncertainty.
5. Old age
Not yours, the bull market’s—it’s been running a long nine years, the second-longest stretch in history. The good news is bull markets don’t die of old age, as the Wall Street saying goes. But the longer it lasts, the greater the chance something could disrupt it—which has contributed to investor skittishness.
What do we do with all this info?
Remember that the market’s still up over the long term. Despite recent slips, the Dow is about 15 percent higher than it was a year ago and an impressive 60 percent higher than five years ago.
Aside from ensuring your portfolio still fits your risk tolerance and long-term goals, there’s not much to do—besides add your two cents to the public debate on the above issues. There’s a lot of uncertainty right now, and the market hates uncertainty. So expect more volatility, but keep your eyes on the prize. Even if the market drops again, your best bet is to hang on.
“Investors should maintain a long-term perspective that extends longer than one election cycle or economic cycle,” says Greg McBride, Bankrate’s chief financial analyst. “Patient investors will be rewarded in the long run.”
This post was updated on April 4.
March 26, 2018