December 2, 2022

Donalds Hobby

World Finance Reviews

Investor Tips After Stocks’ Worst Month Since Pandemic Began

April was a bad month for the stock market.

The S&P 500, a common benchmark used to measure how stocks are doing overall, fell 8.8% in April while the Dow Jones Industrial Average declined by nearly 5%. It marks the worst monthly performance for both indexes since March 2020 when the COVID-19 pandemic hit the U.S. The Nasdaq Composite also dived 13% in April, marking the index’s worst monthly performance since October 2008.

None of that means you should panic — and it certainly doesn’t mean you should rush to change your investing strategy.

“Markets go up and down and investing is a long-term undertaking,” says Rob Williams, managing director of financial planning, retirement income and wealth management at Charles Schwab. “This is part of the cycle of economic growth.”

Still, that doesn’t make the current state of the stock market any less stressful. Here’s what you need to know, and how you can best prepare for the future.

Why are stocks down recently?

Sky-high inflation and the Fed’s aggressive rate hike plan have investors fearful.

The inflation rate is increasing at its fastest pace since the early 1980s as prices increase for everything from cars to food to gas. The Federal Reserve kept interest rates near zero since the COVID-19 pandemic started, but then it hiked its benchmark interest rate in March for the first time since 2018 amid rising prices. The Fed is poised to lift it by half a percentage point this week.

Raising short-term interest rates is a tool the Fed uses to fight inflation, since high interest rates curb businesses’ and consumers’ abilities to borrow and spend money. But that constrained spending also tends to crimp prices for financial assets, like stocks and cryptocurrency, and it can worry investors about the outlook of financial markets.

On top of inflation concerns, some major technology companies took a hit to their earnings during the first quarter of 2022. Netflix reported a loss of 200,000 subscribers during the first quarter of the year — the first decline in paid users for the company in more than a decade. Amazon also reported slowing growth and rising costs in its first quarter. Meanwhile Apple’s earnings beat expectations, but the company has warned of current challenges that could hurt sales, including supply chain constraints. As a result, the stock prices of these popular investments suffered.

The stock market has also seen recent volatility in the wake of the war in Ukraine.