Recent stock plunge is a worrisome fact for investors and diversified market participants. Ongoing instability usually is a sign for further market corrections. Unstable political climates in the Middle East and Ukraine/Russia impact negatively the stock markets. Lower financial results, than projected and shaky economical fundamentals in the leading developed countries bring further grim details to the picture. Event tech giant Apple and Chinese Alibaba feel the negative effects on the global markets.
History teaches clear lessons about how this period of history will end - namely with a crash that wipes out years of prior market returns. The fact that a few investors will get out is simply a matter of statistics. There are many speculative investors out there who may be inexperienced, or just plain greedy, but they don't understand the rules when it comes to cashing out before a bubble is burst.
Since September 19 we've had a small decline in most stock indices, and then a rebound rally. This can either be a new, larger downtrend, which will assert itself in the coming weeks, or yet one more correction in a still-ongoing bull market. We don't know, yet.
If you cannot stomach market swings of a few percentage points, then you shouldn't be in stocks, anyway.
Investors should have been worried before the recent decline in stocks. We've had quite a run since the 2009 low, and the US market is being viewed as the "market of last resort" in many foreign countries. Things ain't great here, but they are perceived as being better than at home, for many foreigners.
The very low interest rates also make stocks somewhat "the only game in town." This does not mean that serious stock market declines cannot occur; they most certainly can.
In the US, we have an enormous long-term problem due to the massive federal debt. Debts this size are never paid off, the market has other ways that it resolves things. Either we continue to debase the currency - inflate the money supply and drive down the value of the US Dollar, 'run the printing presses,' etc., by way of continuous debt-expansion - OR - the gov't outright defaults on its debts, says, in effect, "We ain't payin...' "
One way the debts are inflated out of existence - they may be repaid, but the repayment is in Dollars that are worth much less. The other way the debts are not repaid, a very deflationary thing, as the money supply is then contracting.
This is not to say that the stock market cannot rally for years yet. However, many of the conditions for a stock market top of significance are present, including vast investor optimism, and the assumption that "things will keep going," after the big rally of the past 5 years.
No, investors should not be worried after the recent stock plunge, because stocks rise and fall on cycles. Investors should know that after a period of time the stock market will go back to its original levels. Historically that is what it has done. It's not the market in time; rather the important thing is time in the market.
The stock market recently stabilized after the plunge last week. The fast turnaround and stabilization signals that the market is stable yet feeling the effect of the many global challenges that are currently facing the world economy. The market will be hard pressed to remain constantly stable as long as there are so many international conflicts affecting the modern world.