Weekly Market Commentary 02/09/2018

The stock market officially entered correction territory this week as both the Dow Jones Industrial average and the S&P 500 indexes fell by more than 10% from their January highs by the close of trading on Thursday. Whether Friday’s rebound was just another blip within the erratic drama unfolding over the past two weeks or marks the end of the market’s worst decline in two years remains to be seen. That said, we will keep our seat belts firmly buckled until calmer conditions return. Hopefully, this will happen before the economy suffers a backlash, as the 10% plunge wiped out about $450 billion of equity wealth. Just as investors tend to spend more when they feel richer, they also pull back when their financial positions worsen. But it takes time for this so-called “wealth effect” to fully translate into changed behavior, and the current two-week episode is not long enough to bring that about.