Is the Dow Headed Lower?

After two days of pretty steep declines, the stock market finally stabilized today. The Dow Jones Industrial Average (INDEX: ^DJI  ) fell 0.1%, but the broader market was mixed. Small-cap stocks fell more sharply, but the Nasdaq Composite (INDEX: ^IXIC  ) was up 0.4%, and the S&P 500 (INDEX: ^GSPC  ) was down less than a point. Gold and oil prices both rose sharply, while bond yields and the U.S. dollar fell.

Is more downside coming?
With the Dow now having fallen three days in a row, some investors are starting to wonder whether a larger correction is imminent. With most of the major benchmarks having traded at multiyear highs for some time, the last thing anyone wants to do is give back hard-earned profits.

But even if a correction is coming -- and eventually it will -- you shouldn't let it have a marked impact on your investing strategy. Keep in mind that just six months ago, the Dow traded below 10,700. Even a full 10% correction for the Dow from its recent highs would leave the average with more than a 10% gain from those October lows.

More importantly, not every stock you own will respond the same way to an overall market decline. During 2008, when the S&P 500 fell 37%, Dow stalwarts McDonald's (NYSE: MCD  ) and Wal-Mart (NYSE: WMT  ) managed to gain ground, as the bad economic conditions that sent much of the stock market for a loop benefited their particular business models. That's no guarantee that they'll be winners in any future correction, but you will be able to find some stock that successfully navigates changing conditions to create profit opportunities for investors.

Don't panic!
So as the three-day weekend begins, don't let yourself be nervous about the potential for a steeper decline for the stock market. Stocks will rise and fall, but over time, you can still find investments that will deliver the returns you need.

In fact, a long-term mindset is essential for finding the best possible returns. Tune into The Motley Fool's special report on retirement to discover the names of three promising stock picks for long-term investors. Get your free report today before it's gone forever.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter. The Motley Fool owns shares of Wal-Mart. Motley Fool newsletter services have recommended buying shares of McDonald's and Wal-Mart, as well as creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1856876, ~/Articles/ArticleHandler.aspx, 10/30/2014 12:00:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement