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Discussion Board 5: The Lost Decade
Part A:The United States Stock Market is virtually at the same position today it was 10 years ago. There has been no sustained growth in the market, as measured by the Dow Jones Industrial Average (DJIA), since January 2000. Please discuss the signs that you see for the future of The United States stock markets for the next decade.
Part B:Peer Response 1 (Alana): From what I’ve read, I don’t feel very optimistic for some big magical upswing in the markets over the next decade. An article from Morningstar discussing future predations suggest that a wise investor take a more conservative approach when managing their portfolios to lessen the risk of coming up short if planning for retirement. It also seems like if for the last 16 years there’s been no significant catalyst for growth, what is different now (or will be)? Right now there’s a lot of economic uncertainty (especially it being an election year) and there seems to me like a lot of potential for people to remain a bit more reserved with their investments because of it. On the flipside, advances in technology could help improve the markets, but issues of sustainability might also change the way a great deal of businesses are managed (I’m hoping).Peer Response 2 (Laura): Ten years ago, we were stuck in 2006 and our stock market had a few disturbances, such as a slumping housing market, inflation and low yields for long term bond. This economic slowdown has headed for severe recession. Many within the stock market on Wall Street were hoping for more of a gradual slowdown without tipping into a recession. Through history, the final year before a presidental election, the Dow Jones Industrial Average (DJIA) has been positive (Paradis, 2006). In 2008, we all faced a market crash here in the United States and that crash has been the worst crash in history. In 2008, the market plunged 53% (Zeiler, 2016). Nowadays, in 2016, the stock markets across the globe is trying to figure out how to not trigger another recession. So far, the markets have only dropped about 7 % in the stock market. The market crashed over an 18 month ordeal that started due to the housing market. As long as the economy is smart about their investing, there is time to avoid the crash this time. Investors are now recommending to look for bargains among stocks as they plan to hold for a longer time and stay in the game (Zeiler, 2016). As we move forward, there are talks that the market is starting to reflect high levels of optisim for the futture and that the economy is headed for a recovery. Investors are hoping to enter a strong economic growth phase. To oversimplifying, when investors are buying more stocks than bonds, they expect growth. When more bonds are being bought than stocks, they expect stagnation or even contraction. Given the history of our market, the market is currently forecasting a growth rate to spread over the next few years of about 1% (Bowyer, 2013). There is still some expected downfall to happen, but not so much as to trigger another recession. From the research that I was able to complete, I do believe that our economy is starting back down the path of the market crash that affected everyone back in 2007 and 2008. I do also believe that the closer we get to this presidental election, the market will not be smooth in either direction. I also feel like with the presidental election, our candidates will have a lot to do with how our market will recover or maintain itself. Right now, I believe there is a lot of economic uncertainty, especially as we continue to move forward through this year and this election. Please note that all parts are to be completed as separate entities.