Does it feel like the sky is falling and the market is melting down?

We are sure you have seen the headlines this week, let’s take a step back and take a look at what’s going on.

After hitting new highs last month, markets dropped dramatically early this week, erasing months of gains.1

However, we have seen the market bounce from earlier in the week ( volatility is high )

(Scroll to the end if you want our takeaways and how we can help)

What’s behind the market drop?

A couple of major factors fueled the sudden selloff:

-Weaker-than-expected economic data that sparked recession fears.

-July’s soft jobs report triggered a recession indicator that caused U.S. stocks to sell off in fear.2

-Though it does not appear that the U.S. is in a recession now, weakening economic data is increasing the risk that a recession will strike.

Speculative currency trading by corporate investors

-“Carry trading” is a risky strategy that involves borrowing money in a currency with a low interest rate (such as the Japanese yen) and then reinvesting the money somewhere else where returns are higher.3

-This strategy has become popular in recent years because of Japan’s very low interest rates.

-Its success depends on cheap borrowing currencies and low market volatility.

-However, that strategy is no longer paying off.

-Japan’s central bank recently hiked interest rates, and markets grew more volatile, hitting traders with a double whammy.

-The “unwinding” of these speculative investments triggered a global selloff as traders sold positions to cover losses.

Hard investing truth: there’s always a reason to sell.

Markets are always waiting for the next opportunity to melt down.

That’s part and parcel of being an investor these days.

There will always be something happening that can cause anxiety, fear, and the knee-jerk desire to sell.

But panic selling in response to a market stumble is the wrong move.

Selling and sitting on the sidelines typically means missing out on the best market days as investors sell the dip and turn positive again.

Though markets bounced back quickly, it's possible the volatility and selling pressure will continue.

It's very common for markets to experience a selloff after reaching historic highs.

We’re watching closely and monitoring the data, including possible Federal Reserve decisions that could move markets.

How we can help:

-If you’re worrying about the current situation, don't have an advisor in your corner, want a second voice, or need your financial emotions checked-on.

-We have the skills, team, and experience to go through this with you and support you.

-One of the most important parts of our role is to have a reassuring voice and educated opinion when the market jitters hit.

-If you need that voice, Let's Talk.

Warmly,

‍The Wela Financial Advisory Team

P.S. It feels like we're hitting especially uncertain times. With new threats of war, a presidential election, and economic fears, the crystal ball seems very cloudy.

These are the moments when taking a step back and reminding ourselves of the why behind our strategy is so critical. Please reach out if you have doubts or concerns.

‍_Sources

_{1. https://www.cnbc.com/2024/08/04/stock-market-today-live-updates.html}

_{2. https://www.cnbc.com/2024/08/05/recession-what-is-the-sahm-rule-and-why-is-everyone-talking-about-it.html}

_{3. https://www.cnbc.com/2024/08/05/carry-trades-a-major-unwinding-is-underway-amid-a-stock-sell-off.html}

‍_{Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.}

_{This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.}

_{The S&P 500 is an unmanaged composite index considered to be representative of the U.S. stock market in general. Returns based on closing price performance. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. For illustrative purposes only.}

_{Brent Forrest & Associates, LLC. dba Wela Financial Advisory (Wela) is a registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.}

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