Wild Wall Street Ride Caused Primarily by Interest Rate Hikes
The Wall Street rally that had lasted for several years of spectacular gains lost its steam on Wednesday when the Dow Jones 30 Industrial average lost over 800 points.
Director of Fixed Accounts at S. G. Long and Company, Josh Denny said investors were frightened by the Federal Reserve’s movement to keep raising interest rates.
“In terms of what caused it, there are multiple theories,” said Denny. “Many would point first to rates continuing to rise, both on the short term and the long term, which would typically translate into mortgages.”
Denny said he hesitated to call Wednesday’s drop of over 800 points a ‘correction’.
“I don’t want to call it a correction yet,” he said. “As I look at my screen at the moment the S&P 500 is still positive by 3 ½ percent for the year, the Nasdaq is still positive by almost eight percent. It was certainly a rapid, sudden violent move, but people often forget that’s what the stock market does relatively commonly.”
Dollar cost averaging is a method that many use to successfully invest.
“The concept is that you’re able to buy more of an asset at a lower price than at a higher price,” said Denny. “If you continue to invest, as an asset you like goes down in value, you can buy more and more of it and over the long term that’s oftentimes a good approach.”
Denny says the key to successful investing is to ‘know what you own’, as in the stocks that are purchased and to listen to a trusted financial adviser.