If you have been following the news, you will note that there have been many big changes to the economy this week. There are many signs that our country is heading for a recession and the government is trying to balance. These sorts of actions are very interesting as we head into the next election. They also affect our own pocketbooks.
After months of gradual decline, the stock market had a large drop this week. Since October, the S&P has dropped 16%, the Dow dropped 15% and the Nasdaq is down 20%. All three of these indicators are not good for the economy. On Monday, a holiday here, but not elsewhere, the stock markets in Asia began to plummet. No surprise then that Tuesday brought a bad day in the market here. Living in a volatile world economy, we often see patterns across nations.
Due to this trend, the Fed decided to call a special session to fight this trend. Yesterday, the Fed’s chief announced the biggest single interest rate cut in years. This dramatic turn of events has already influenced the world markets with gains in the Asian stocks.
What does it mean for you? Here are a few tips:
Don’t react to long term investments. Your retirement accounts will balance out, even with this recent slump in the stock markets.
Make sure you don’t have your emergency funds in any stock generated accounts. This should be the case at all times, even when the market is not in a slump.
If you have been thinking of investing, this could be a great time. When the stock market is low, it can be a great time to start. Although, keep in mind no one actually knows when it will take an upturn and you could still lose money initially.
With an interest rate cut, it is a good time to borrow. If you were thinking of buying a house, this could really help you get a better mortgage. If you recently bought a house with a higher interest rate, this could be a good time to consider a refinance.
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*Federal Reserve Board’s Rate Cut