If you’re feeling whiplashed from the mid-week collision of good and bad economic news, you’re not alone.
On Wednesday, the U.S. Federal Reserve’s Open Market Committee (FOMC) meeting minutes were released and investors were reassured by what they read. Although the Fed lowered its Gross Domestic Product (GDP) growth projections for the U.S. first half of 2014, the minutes indicated real GDP is expected to grow faster over the next few years than it did last year (FOMC Meeting Minutes, Staff Economic Outlook, paragraph 1). In addition, “to support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate” (FOMC Meeting Minutes, Committee Policy Action, paragraph 2). Reassurance the Fed would not increase the federal funds rate sooner than expected was received with gusto and the FTSE 100 and all three major U.S. stock indices raced ahead finishing the day up more than 1 percent.
On Thursday, good news about the world’s largest economy (United States) ran right into not-so-good news about the world’s second largest economy (China). Economic indicators suggested China’s economy might be slowing faster than anyone expected. MarketWatch reported, “[China’s] Exports fell 6.6% from a year earlier, slower than the more-than-18% tumble in the previous month, but widely missing a Dow Jones survey consensus for a 4.2% gain. Imports were even uglier, plunging 11.3% – more than the 10.1% drop in February – and trailing far behind an expected 2.8% gain.” When trading ended on Friday, the FTSE 100 was down 2.8 percent and the Standard & Poor’s 500 was down 1.8 percent for the year.
When markets get dramatic, it may be a good idea to stay calm and remember one of the most basic tenets of investing: Buy low, sell high.