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Stock market actions should be observed with steady hand

02/28/2009

Yesterday, we learned that the fourth quarter was worse than we thought. In fact, it was the worst in 26 years. We thought our economy shrank 3.8% but learned it actually shrank 6.2%. Not too surprisingly, the stock market was disheartened and lost even more wealth.

The perspective of time is everything. When we were originally told last month that the economy shrank 3.8%, we were expecting to be told 5.5%. The stock market liked that and created wealth that day.

The stock market can be expected to over-react, which emphasizes the importance of not obsessing about any one report or any one day’s performance. If you have a real life outside your portfolio, this is a particularly good time to enjoy it!

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