Posted: Aug 24, 2015 6:27 PM EDT
Updated: Aug 24, 2015 7:32 PM EDT
By Gary Brode, ABC7 Weekend Anchor
It’s being called “Black Monday.”
Wall Street got a serious jolt Monda morning.
At one point, the Dow Jones average dropped 1,000 points in a matter of minutes. Following a historic plunge, it recovered a bit but still closed at its lowest point since February of last year.
The NASDAQ and S&P also lost ground, losing nearly four percent of their value.
ABC-7 Weekend Anchor Gary Brode is getting us more on who should be concerned.
Many financial advisers will tell you the stock market is a long term game. Sometimes you have to take your lumps. However, one adviser tells me if you’re heavily invested in stocks and you’re ready to retire, it might be time to get out.
Financial Adviser Todd Macke says, “I had that in a text this morning, ‘is this the makings of a crash?’ and that can kind of cause people to do things that are not really wise which would be to sell.”
It’s a common knee jerk reaction. Especially when the Dow saw a 1,000 point drop before you finished eating your Cheerios. It eventually finished down nearly 600 points.
The cause? Economist Chris Westley said “the Chinese Central Bank has been inflating its currency for a long time and finally that market is beginning to correct.”
Not to mention the anticipation of increased interest rates.
“They’re like someone whose used all of the food in the cupboard to get through this drought and the pantry is getting bare,” Macke said.
To fill the pantry, short-term rates for car loans or credit cards could see an interest increase soon.
Westley says he wouldn’t be surprised to see another dramatic market drop in the near future.
“We’ve never been in a situation like this where all the central banks created growth.”
Westley believes this market correction could mean opportunity.
He says “if you’re heavily in stocks you’re probably going to have to suck it up and ride it out but if you’re holding cash then suddenly that cash has become a lot more valuable than it was on Thursday.”
But Macke believes a certain group of people should seriously consider getting out before it gets worse. “Someone who is approaching retirement. We’re talking a few months away from retirement.”
Macke does say there is a positive. Bonds get more interest because people tend to flock to them as a safety net.
Both Macke and Westley believe the volatility of the stock market will continue so they say it’s important to diversify.