Market tanked 2.6%, now what?

The Philippine Stock Exchange Index (PSEi) dropped 2.58% to 6,435, joining several other countries in the region that have endured similar steep sell-offs in recent days [link]. The biggest drops were seen in export-heavy markets like Japan, Taiwan, and Korea, and the general theory appears to be a concern over a potential US economic slowdown or recession and how that if it happened, would impact the global economy. For the PSEi, the Industrial and Property sectors were the biggest losers on the day, down 3.53% and 3.35% respectively. While the day seemed grim, it wasn’t even the worst drop investors have endured so far this year; the PSEi fell 2.93% back on June 23, after it fell a cumulative of 2.66% over the previous seven losing trading days. 

MB bottom-line: I’m not trying to minimize what has happened, only put it into perspective. Depending on your investing time horizon, yesterday’s result can range from completely irrelevant (because you always sell to cash each day) to utterly disastrous (because you hold positions for only a few days at a time). Long-term investors will fit somewhere in the middle of those two extremes, based largely (again) on their investments’ time horizon and on the particular makeup of their portfolios. My portfolio was down about 1.5%, and mostly from the steep pullback in REITs. But for me, I don’t have a plan to ever sell the positions that I’ve built in those stocks, so yesterday’s market action was closer to “irrelevant” for me than it was to “disastrous”. As for what happens next, nobody knows. Analyst sentiment appears to be that there’s more downside risk than upside potential right now, and of course, there’s always the black swan lurking in the Middle East as the world braces for whatever Iran might do to Israel, and for whatever Israel might do Iran in retaliation, and whatever unpredictable knock-ons might emerge from that chaotic soup of regional interests. August is feeling like a big month.

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