5 Reasons Not To Panic About The Stock Market

A breakdown of what's going on.

Monday was not a pretty one on Wall Street. The Chinese stock market took a hit last week and the reverberations meant the Dow Jones plunged 1,000 points during early trading, the worst since 2008. Stocks such as Facebook and Apple lost 12 and 10 percent of their value, respectively. While stocks' overall values did pick up by the end of the day, the last week has been one of the worst since the 2008 crisis. While the urge to sprint to your bunker and review that guide to bartering you found at a garage sale once may be strong, hold off for now. "Manic Monday" definitely wasn't good, but the financial landscape has changed a lot since 2008, so you probably don't need to brace yourself as much as you did then. Here's why.


1. Things appear to be stabilizing.

Stocks began to rebound on Tuesday. Though they eventually pared their gains and the Dow ended in negative territory, it's a sign that the selloff is easing and stocks might be stabilizing.

2. The job market should handle this better than it did in 2008.

The general employment trend has been upward this year, unlike when things really began to unravel in September 2008. During the financial crisis, jobs had been declining steadily since February, which culminated in peak unemployment in 2009. So even if this does mean job cuts in some companies, it won't be with the severity we saw seven years ago.

3. This isn't another housing crisis.

The financial crisis of 2008 was rooted in the housing market collapse. Banks were allowing people to buy houses at sub-prime rates, meaning people who shouldn't have been approved for such some loans were able to get them. People couldn't pay off their mortgages, especially since their houses' inflated values shrank, which led to the serial foreclosures we saw in 2008 and 2009. So if you're worried this could mean you'll lose your home, remember you're in a relatively healthier market environment than last time. 

As with jobs, the trends leading up to these current turbulence are the reverse of what was happening in 2008. Houses have been gaining value steadily, but not to the inflated degree we saw before the housing bubble burst.

4. If you have stocks, or are looking to buy, don't panic.

Stock prices will rise again, so investing during a dip means you can buy them when they're cheaper.

If you have stocks, you definitely don't want to sell right now. Stocks are long-term investments, so in general you shouldn't be reconfiguring your portfolio every time the wind changes. Making reactionary moves could mean you'll miss the chance to regain what was lost when things pick up again.

5. The losses are nowhere near what happened in 2008.

At the start of the Great Recession, U.S. markets lost 30% of their value. That's enormous, but a lot of people eventually regained the money they'd lost in 2008 by 2010, after the market's worst turn was complete.

There's a tendency to conflate the loss in stocks values with other crises that were going on, particularly when you probably heard so many stories of people losing their life savings to Bernie Madoff's pyramid scheme. The 2008 crisis was a constellation of shady, illegal practices in the finance world spiraling out of control in-synch. As far as share values go, however, things have generally made a steady recovery.


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