Why Every Dow Stock Is Lower

Two words: fiscal cliff.

On the day after Christmas, the CEO of Starbucks (NASDAQ: SBUX  ) , Howard Schultz, posted a letter online titled "Let's Come Together, America." In it, he lamented about the failure of our "elected officials to come together and reach common ground on [the fiscal cliff]," a series of tax hikes and spending cuts that are set to take effect at the beginning of January.

But unlike other CEOs who have said similar things, Schultz took it one step further, instructing Starbucks' employees in Washington, D.C. to write "come together" on all of its customers' cups. While this is most certainly a gimmick, when the CEO of a Fortune 500 company feels the need to take it to this extreme, it may be evidence that there's something seriously wrong with the group of people we've elected to represent our interests in Washington.

And if you need any further proof, just take a look at the market today. As I write, all 30 of the stocks on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) are lower for the day. This is despite the fact that two reports issued this morning show that new-home sales rose to their highest level last month in more than two years, and that the number of Americans filing for unemployment benefits last week was at a four-year low.

The significance of this for investors is simple. In the absence of an agreement, stocks could very well get cheap -- and, if I were a betting man, it seems that the financials like Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) could lead the way down. Despite B of A being up more than 100% this year, the waffling in Washington is still affecting it. Virtually all economists are predicting a recession if the economy is indeed allowed to careen over the proverbial cliff. And, despite the known inaccuracy of economic predictions, the mere fear of such an eventuality could trigger a sell-off.

So, what should you do? Two things. First, don't panic if and when such an eventuality materializes, as stocks will invariably rebound once such an agreement is reached. Second, you might want to reserve some capital in case things do get cheap, as "buying low" is a pivotal part of successful investing.

Thinking about investing in Bank of America?
To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


Read/Post Comments (0) | Recommend This Article (2)

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: 2170560, ~/Articles/ArticleHandler.aspx, 11/26/2014 10:14:15 AM

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