Why You Shouldn’t Freak Out Even If The Stock Market Does

So why did futures for the Dow Jones Industrial Average drop 500 points in an instant? There is a widespread view among the investment community that the stock market is overvalued. Whether there is such a thing as a correctly valued stock market is a genuine financial dilemma, but what mattered on Wednesday morning was that most traders believe that stock prices are too high. The market has been more or less steadily rising since February 2009, with the Dow, NASDAQ, SP 500 and Russell 2000 indices all more than tripling. President Donald Trump’s election ushered in a wave of euphoria among traders expecting deregulation and big corporate tax cuts, and while we’ve seen exactly that, people got a little carried away. The Fed, moreover, had been keeping interest rates close to zero since the 2008 financial crisis to support a flailing economy. With job numbers looking better, the central bank has been steadily raising rates, which typically depresses stock values.

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