Is the Faltering Stock Market a Reason to Worry?


The current environment of rising interest rates, political arguments, and overseas financial stresses is apparently reason enough for some investors to hesitate.

Covid-19 statistics have improved recently for our country as a whole, although trends differ by region. About 65% of U.S. adults have been vaccinated according to the Mayo Clinic. For those over 50 years old the vaccination rate is higher than 80%. Covid-related fatalities are very rare for vaccinated people. Further good news comes in the form of a new antiviral pill from Merck which improved outcomes dramatically in a placebo-controlled trial, stoking hopes that future waves may be easier to treat. Life is gradually getting back to normal. International travel restrictions are loosening, and most schools have reopened for in-person instruction.

Speaking of unstable situations, we said last month that China’s Evergrande Group was on the cusp of bankruptcy. Early indications are that China’s ruling party is reluctant to offer support, preferring to let market forces determine the losers and the extent of contagion. As of this writing Evergrande has not yet triggered the conditions that define bankruptcy. It is starting to miss interest payments on its debt, however.

The U.S. stock market has faltered since the start of September. This seems logical in the presence of rising interest rates, political arguments, and financial stresses overseas. We can only expect more volatility heading into the third quarter’s “earnings season.” We observe that about 25% of U.S.-listed stocks are currently down at least 20% from their 52-week high. About 10% of stocks are down that much from their highs in the last fifty days. Volatility is generally a good thing for stock pickers. That is where opportunities come from. Investors who focus on growing, profitable companies like those in each issue of the Investor Advisory Service stock newsletter should make progress over time, whatever happens to prices and interest rates.

Reprinted from the November 2021 issue of the Investor Advisory Service. For more information, to download a sample issue, or to subscribe to the best investing newsletter in the U.S., visit Investor Advisory Service.