Stocks are dropping significantly

‍Is your portfolio in the red today? Then you’re definitely not alone. In fact, across most indexes we’re seeing around a 1,5-2% decline. So, how should you respond? First and foremost, remind yourself that very common for the stock market to move up and down. So that means, that short-term declines are to be expected. Instead, remind yourself about your strategy and why you chose to invest in those companies initially. And remember that as a long term investor, a short term drop is not a reason to sell your stocks.

‍Disappointing US job report

‍So now to the explanation…What exactly happened to cause the stocks to drop ? On Friday in the U.S., stocks fell sharply as a much weaker than expected job report was published. In the US, the job market is a key driver of the US economy. However, the July report showed that only 114,000 new jobs, which is significantly lower than the expected 175,000 jobs. This ignited worries that the economy could be falling into a recession.

‍Japan is entering bear market territory

‍Looking at the Japanese market, it’s the same story. The leading Nikkei index dropped by 7.2% on Monday morning, while the Topix index is down by over 8%. This decline is due to Japan raising interest rates to 0.25%, the highest level since 2008. In comparison, the average interest rate in the Eurozone is 4.35%. Since their record highs on July 11th, the Nikkei and Topix have fallen by nearly 20%, bringing them close to what’s known as bear market territory, which is defined by a 20% drop from the peak.

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Sources: CNBC, Euroinvestor & Financial Times