Current:Home > MarketsThe stock market plunged amid recession fears: Here's what it means for your 401(k)-DB Wealth Institute B2 Expert Reviews
The stock market plunged amid recession fears: Here's what it means for your 401(k)
View Date:2024-12-24 09:42:45
Retirement accounts took a hit Monday amid a global market selloff.
The S&P 500 closed down 3%, while the tech-heavy Nasdaq composite dropped 3.4% and the Dow Jones Industrial Average fell 2.6%. It was the biggest daily drop for the S&P and Dow since September 2022.
While some investors may be worried about the state of their 401(k), experts say there's an easy way to handle the dip: ignore the selloff and keep investing.
“Hold tight,” said Kristina Hooper, chief global market strategist at investment management company Invesco. “For most investors, they have a long-time horizon. It's not measured in months. And so while it's hard to do, putting on blinders is perhaps the best single decision investors can make for their portfolios.”
Got financial questions? Sign up for USA TODAY's The Daily Money newsletter.
Why is the stock market down?
Monday's selloff comes on the heels of the disappointing July jobs report released Friday that stoked recession fears.
U.S. hiring slowed as employers added 114,000 jobs – a steep decline from the 175,000 jobs economists estimated were added last month. Meanwhile, the unemployment rate was 4.3%, the highest since October 2021 and up from 4.1% in June.
The jobs report triggered the Sahm rule, a measure that says if unemployment based on a three-month average rises by at least a half percentage point over the past 12 months, the nation is likely in a recession.
Claudia Sahm, the former Federal Reserve economist behind the namesake rule, told Bloomberg Television it is unlikely the country is in a recession, but “we’re getting uncomfortably close to that situation.” Scott Wren, senior global market strategist at Wells Fargo, told USA TODAY that while recent economic indicators raise the risk of a recession, the odds of entering into one within the next 12 months are still low.
Stock market updates:How US markets are feeling impact of plunging global markets
How far has the S&P 500 fallen?
The S&P 500 closed at a record 5,667.20 on July 16. Since then, the index has fallen more than 8%.
How far has the Dow fallen?
The Dow has dropped more than 6% since it closed at a record 41,198.08 on July 17.
What does this mean for me and my 401(k)?
While it may be tempting to halt investments or pull out money when prices are falling, experts say the best course of action is to avoid checking your 401(k) account and keep investing.
“You definitely would not want to stop adding money,” said Sam Stovall, chief investment strategist at investment research and analytics firm CFRA Research.
If investors are itching to take action during the dip, the better move might be to increase investments while prices are low, according to Scott Wren, senior global market strategist at Wells Fargo.
“This is an opportunity,” he said. “If anything, you should boost your percentage that you're putting in when the market is down, because over time – two, three, five-plus years – it's very likely to work out.”
Ryan Detrick, chief market strategist at financial services firm Carson Group, said these periods are “never fun” for investors, “but they are part of the process." A market drop of at least 10% from a recent high – also known as a correction – happens about once a year.
“For longer-term investors, it is times like these that help you reach your goals,” Detrick said. “Buying when things go on sale is always a good strategy, even if it feels like the wrong thing to do in the moment.”
veryGood! (39)
Related
- Human head washes ashore on Florida beach, police investigating: reports
- July 2024 full moon rises this weekend. But why is it called a 'buck moon'?
- EPA watchdog investigating delays in how the agency used sensor plane after fiery Ohio derailment
- 2024 Emmy Nominations: All the Shocking Snubs and Surprises From Shogun to The Bear
- Colorado police shot, kill mountain lion after animal roamed on school's campus
- Tennessee won’t purge voter rolls of people who disregard a letter asking them to prove citizenship
- Angel City FC to become highest-valued women’s sports team with historic $250 million deal
- Brad Pitt seeks dismissal of Angelina Jolie's request for messages about plane incident
- Police cruiser strikes and kills a bicyclist pulling a trailer in Vermont
- Ex-Trump adviser Peter Navarro is released from prison and is headed to Milwaukee to address the RNC
Ranking
- Mike Tyson has lived a wild life. These 10 big moments have defined his career
- Not Sure How To Clean a Dishwasher or Washing Machine? These Pods Are on Sale for $13 & Last a Whole Year
- LAFC vs. RSL, possible league history highlight MLS slate on 'deadest day in sports'
- Here's how to get rid of bees around your home
- Why Amanda Seyfried Traded Living in Hollywood for Life on a Farm in Upstate New York
- Amazon Prime Day 2024 Has All the Best Deals on Stylish Swimwear You Want at Prices You'll Love
- 2 arrested related to the killing of a woman whose body was found in a toolbox on a river sandbar
- 3 Montana inmates die in Cascade County Detention Center in 2 weeks
Recommendation
-
Man killed by police in Minnesota was being sought in death of his pregnant wife
-
EPA watchdog investigating delays in how the agency used sensor plane after fiery Ohio derailment
-
Massachusetts House moves toward a vote on how to boost renewable energy
-
How NBC's Mike Tirico prepares for Paris Olympics broadcasts and what his schedule is like
-
'Heretic' spoilers! Hugh Grant spills on his horror villain's fears and fate
-
The Best Amazon Prime Day 2024 Alternative Sales: 60% Off Nordstrom, 60% Off Wayfair & More
-
Kentucky Gov. Andy Beshear endorses federal effort to reclassify marijuana as a less dangerous drug
-
Here Are the Irresistible Hidden Gems from Amazon Prime Day & They’re up to 90% Off