Stock investors are coming off the worst week in two years, leading to the inevitable question: What should I do when the market drops? The answer for long-term investors is clear: nothing.
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In the topsy-turvy, bizarro land of Wall Street, sometimes a bit of good news about the
economy can be bad news for investors. The economy added 200,000 jobs in January,
higher than last year’s monthly average of about 170,000. The unemployment rate
remained at a 17-year of 4.1 percent; and perhaps most encouraging, annual hourly
earnings jumped by 2.9 percent, the fastest pace since the recession. (The figure does
not include special one-time, tax-related bonuses that have thus far helped about two
percent of workers.)
Five years ago, I wrote an article that warned not to place too much emphasis on the
ability to work longer to fund retirement. The risk was abundantly clear: just because
you want to keep toiling, does not mean that you will be able to do so. For some, there
will be physical limitations and for others, there may not be a job. That’s why nudges
like me encourage you to diligently save during your working years.
Treasury Secretary Mnuchin did not cause the recent dollar dive. His remarks
(“Obviously a weaker dollar is good for us as it relates to trade and opportunities”) at
the World Economic Forum in Davos were surprising, because government officials have
historically not been willing to acknowledge that when the value of the dollar falls, it
makes US exports cheaper. The result can be good for US manufacturers and can also
improve the trade balance.