The market upheaval of recent days has shaken investors across the globe, leading to a lot of head scratching and pity for the losses piled up. After a promising start to the week, stocks declined sharply on Wednesday—the Dow Jones Industrial Average posted its worst daily performance since late June—and the S&P 500 and Nasdaq Composite followed suit.
The slump was largely triggered by a strong reading of the Consumer Price Index (CPI) for August, which unnerved investors that the Federal Reserve will continue to hike interest rates. The fear of increased borrowing costs weighed heavily on equities, leading to a widespread selloff in the financial markets.
What’s more, the Bank of Japan left interest rates unchanged this week, adding to the financial market turmoil. It was a surprise move by the Bank of Japan, whose decision not to change borrowing costs contributed to further selling in global markets.
So, where do we go from here?
The odds appear to favor further selling in global markets in the days ahead, as investors remain skittish and uncertain about the future of interest rates and economic outlook. Put simply, the fear of higher interest rates has caused an increase in volatility, and the end result could be a lot more selling before the week ends.
At the same time, it’s important to remember that the market landscape is constantly changing and it won’t necessarily move straight down. Despite ongoing volatility, there may be value in the current environment for long-term investors, and so smart buyers could emerge if the market retreats further.
All things considered, it’s important to remain vigilant and not be too quick to jump on the bandwagon. Evaluate the situation from all angles and be prepared to act if opportunities present themselves. But above all, avoid becoming too emotional and remain focused on your investing goals.