Stock markets around the world have been floating in a sea of red since the beginning of 2016. That, everyone can agree on.
Beyond that, there is little agreement on why it's happening, how bad it will get, and when it might get better.
Rick Newman, author of “Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom,” says Wall Street is over-reacting to undeniable economic turmoil in China. Writing at Yahoo Finance, Newman says China's economy may be slowing, but America's isn't.
“Last we checked, the Dow Jones and S&P 500 indexes were composed of U.S. companies that might do some business in China, but still earn the vast majority of their revenue elsewhere,” Newman writes. “And elsewhere, economic fundamentals are looking way better than the gloomy start to this year’s trading would suggest.”
But taking the opposite view is billionaire investor George Soros. An account by the Sunday Times in Sri Lanka, picked up by CNBC, quotes Soros telling a conference in Asia that the current environment reminds him of “the crisis we had in 2008,” when the financial system nearly collapsed.
Problems in China have heightened fears since the start of the year. In two sessions this week “circuit breakers” stopped Chinese trading after steep declines in stock prices. The second time, the circuit breakers tripped after just 30 minutes of trading.
Falling oil prices are also rattling the stock market. The worry is that the more prices fall, and the longer they stay low, the more likely it is for smaller oil companies to go bankrupt and default on their debt. The fallout from such a scenario would then spill over to the lenders and bond-holders who loaned them money.
But there is another side to the oil story. If oil prices keep falling – and some have predicted less than $30 for a barrel of oil, retail gasoline prices should remain low for the foreseeable future. The Shark Tank's Kevin O'Leary says the economic stimulus from that is being largely overlooked.
Consumers who have some stocks in their retirement portfolio often pay little attention to the stock market, and business reporting about it, except when the market experiences big losses or big gains.
Interpreting the reporting
So it is important to keep this in mind: most market reporting is done for traders, not investors. Traders have a very short time horizon – they're usually looking to get in and out of a position in weeks or months.
What should you do? If you're investing for the future, it's always wise to seek trusted, impartial financial advice before either buying or selling. But we'll also pass along the advice billionaire investor Mark Cuban offered, which you can take for what it's worth.
"While all the selling seems to be based on China and the price of oil, I really don't know what the long term implications for our stock market is," he wrote to the investors he advises. "So I follow the number one rule of investing. When you don't know what to do. Do nothing."