On the very last day of the month, the market stumbled at the finish line. Today the Dow shed over 300 points and the S&P 500 tumbled nearly 2%. Not only did seasonal weakness play a role in this week’s tumble (this week and next week are historically very volatile), but Argentina’s second default in 12 years also weighed on investors’ minds and roused fears that global economies aren’t as strong as they appear. Very few stocks were spared from the sell-off as market leaders and underperformers all slid lower.
It’s a shame that July is ending on such a low note, but to a certain extent we knew choppiness was coming. August is the seasonally weak month of year for Wall Street; with low trading volume the market is going to be particularly sensitive to any negative headline that pops up.
The silver lining to this cloud is that this default is not nearly as severe as the crisis Argentina faced in 2001-2002. The government is still solvent and many experts believe the issue will be resolved much more quickly than last time. So I don’t see this as having a long-term impact the market.
However, what will have a long-term impact on the market is the U.S. economy. In tomorrow’s blog I’ll provide a comprehensive update on the market, so I recommend you check back in tomorrow afternoon to get fully caught up. You don’t go to the beach without lathering on the sunscreen, and you shouldn’t enter the month of August without making sure your portfolio is similarly protected.