Markets will rebound, sometime
This is bad news. The financial system for our country is still trying to find its way around after it got a major shock on Monday, causing the worst day on Wall Street since the Sept. 11 attacks seven years ago.
The Dow Jones industrial average lost more than 500 points, more than 4 percent. About $700 billion evaporated from retirement plans, government pension funds and other investment portfolios, according to the Associated Press.
Lehman Brothers, an investment bank that predates the Civil War and weathered the Great Depression, filed the largest bankruptcy in American history. A second storied bank, Merrill Lynch, fled into the arms of Bank of America.
“We are in the middle of a deep, dark recession, and it won’t end soon. Here it is, and it is pretty nasty,” said Barry Ritholtz, who writes the popular financial blog The Big Picture and is CEO of research firm FusionIQ.
And the fallout was far from over. American International Group, the world’s largest insurer, was fighting for its very survival: New York Gov. David Paterson moved to allow the company to tap one of its subsidiaries for an emergency loan to stay above water.
While these are trying times on the stock market, it is important to remember that there will always be corrections and bear markets that will happen. Statistics show that a bear market, which is a drop in markets by 20 percent or more, lasts for almost a year. Since October 2007, the Dow Jones Industrial Average has fallen about 22 percent.
It is impossible to know when the recession will end, but it will end at some time. The stock markets will recover in the long run. The key is to be patient about what is happening and continue to make sound investment decisions.
If you are investing for the long haul, chances are everything will be OK.