MINNEAPOLIS (WCCO) — If you have a 401K or an investment in the stock market, Thursday was a roller coaster ride.
Stocks were down more than 500 points, but rallied later in the afternoon. The Dow Jones Industrial Average closed down nearly 80 points. This comes after the Dow plunged more than 700 points on Tuesday.
Analysts say this week’s losses could have been even worse, but were mitigated by markets being closed Wednesday in honor of President George H.W. Bush’s funeral.
Experts believe the trade war with China is fueling investors’ fears.
“I think a lot of it is specifically … the tensions with China,” said Professor Andy Winton from the University of Minnesota’s Carlson School of Management. “I think the view is that anything that can cause the trade war with China or other countries to intensify is really going to hurt our growth prospects.”
But it is not just the tariff disputes. The stock market volatility Thursday was triggered by the startling arrest of Meng Wanzhou, the chief financial officer of Chinese telecom giant Huawei. Wanzhou was arrested in Canada on unspecified charges. According to multiple reports, the allegations involved violations of U.S. sanctions against Iran. Wanzhou is expected to be extradited to the U.S.
So what should investors do? Professor Winton says stay the course, and don’t unload stocks even if you are over 40 years old.
“There’s a general view that the younger you are, the more you want to have in stocks,” Winton said. “But even when you’re retired, a lot of people say you want to have a certain chunk, maybe a third still in stocks because these days, a lot of people are living a long time after retirement.”
And to clarify, Winton says because Americans — and specifically Minnesotans — are living longer, so you might want to shy away from that traditional advice to minimize your stock investments as you get older.
Stocks are, as we saw Thursday, more volatile, but they can offer more growth potential in the long term.