Aah so we can all breathe a sigh of relief. After five days of worry and wonder, stock markets are settling down in time for the weekend.
Anybody daft enough to listen toformer Gordon Brown adviser Damian McBride, who urged his Twitter followers to go shopping forbottled water and tinned goods on Black Monday, can nowcreep out of their bunkers. They should have listened to the Fool instead, and goneshopping forshares.
The China crisis was quicklyeased with a couple of interest rate cuts and easier lending rules for local banks. When US second-quarter GDP growth was upgraded from 2.3% to 3.7%, traders couldnt contain themselves. In the UK, todays figures published today show a 2.9% rise in investment growth added to the optimism. At time of writing on Friday, theFTSE 100 is nudging6200 points, 6% higher than its closing number of 5845 on Monday.
Still cheap
If you were consideringbuying cut-price shares on Black Monday, as we wereurging readers to do, your bravery will have been handsomely rewarded.If you didnt buy, dont be too full of regrets because shares are still far cheaper than they were. Despite leaping 3.7% on Thursday, one of its best days ever, the FTSE 100 isstill 12.6% cheaperthan it was in April, when the index hit its all-time high of 7100.
Few investors canaccuratelytimethebottomof acorrection. It is far better to drip-feed money into the market, taking advantage of any dips. Withsince the FTSE 100 expected to yield 3.9% over the next year, upfrom a forecast 3.5% in May, now still looks a tempting time to buy.
No sell-out
There is always the possibility that this is the first growl ofa bear market, rather than a short-term correction. But there are reasons to be positive. In the Eurozone, real M1 money supply is growing as European Central Bank president Mario Draghis newly-minted money starts to catch fire, whichshould fuela GDP growth spurt. Oil and commodity investors are still hurting, butThursdays 10% leap in the oil price has given thema little respite. This weeks suggestion by William Dudley, president of the New York Federal Reserve, that the case for raising US interest rates in September is now less compellingmay also buoy markets.
I hope none ofyou actually soldup on Black Monday. This is the worst thing you could do. The first problem is that you crystallise what were only up to that point paper losses. The second is that you then have to time your re-entry into the market, and the chances are you will leave it too late. Better to stand calmlyon the sidelines than throwyourself onto the rollercoaster ride. Or as I wrote on Monday: Keep Calm And Carry On Investing Foolishly.
Can it!
All this weeks events have shown us is that stock markets behave as they have always done. They go up and they go down, sometimes very quickly. Butin the longer run, if you are patient and re-invest your dividends for growth, they should ultimately make you richer.
It has been a dramatic week but has ended well. So kick back, cook yourself something fresh, and have a glass of your favourite tipple. You can save your canned food and bottled water for the next panic.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
