Today and tomorrow people all around the world are celebrating the fact that the creator of the universe found it worthwhile to come to Earth in human form to give us a chance at a relationship with him.

 

In light of this mind-blowing truth, you really have no reason to worry about anything that I am going to write about in this article. None of it really matters in light of eternity. However, with all of the media headlines these days, I thought you might appreciate an unbiased overview of what is going on with the markets and economy these days.

 

Yes, The Stock Market Is Falling

Just as the headlines are screaming, the stock market has plunged. Stocks have been struggling since the beginning of October. Below is a graph from Google of the S&P 500 over the past 6 months. The S&P 500 is an index representing the biggest 500 companies in the US and is often used as a proxy for the stock market as a whole.

 

 

The S&P 500 has dropped about 17% since the beginning of October. The Dow Jones Industrial Average and NASDAQ, which are the other two popular stock indices that you will hear about in the news, are also hurting. They are down over 15% and 20% respectively.

 

Why?

There are three reasons for all of this. The first reason is the current soap opera we call US-China trade. China is our top trading partner, so when trade gets disrupted or more expensive, we feel it.

 

Coming into office, the president said that he was going to address trade and renegotiate some deals, and recently he has been focused on China. The countries have been going back and forth imposing tariffs and making threats, sometimes following through and sometimes not. There is a lot of uncertainty regarding trade right now, and uncertainty is the stock market’s biggest enemy.

 

The second thing worrying the stock market is slowing economic growth. Many investors are afraid that the Federal Reserve will raise interest rates too quickly and stifle economic growth. Also, growth in China, Japan, and Germany is slowing, making the concern global. This has investors worried about the future.

 

Their worry leads us to the third reason for why the markets are behaving as they are, emotion. The stock market is dominated by emotions. If you look at the past couple of months, there has been some crazy volatility. That means that the stock market has been jumping up and down like a kid on Christmas morning. People get worried about the future and sell, driving prices down. Then they get excited that there are good reports about the economy and prices are low and start buying, driving prices back up. And so it continues.

 

No, The Economy Hasn’t Tanked

Speaking of the economy, it is not in the same boat as the stock market. By all measures, our economy is still going strong. US gross domestic product (GDP), which is basically what we produce as a nation, grew by 3.4% in the third quarter, from July to September. That’s pretty good, considering our average growth rate from 1947 to 2018 has been 3.2%.

 

There are also more than enough jobs to go around. Unemployment has dropped all the way down to 3.7%. The last time it was lower than that was December 1969, nearly 50 years ago. Not only are jobs continually being added, but wages are up. By November, they had increased by 3.9% over the previous year.

 

Things are looking good for businesses, too. Of the 500 largest in the country, earnings were 28.3% higher in the third quarter of this year than they were at that time last year. It’s not only because of the tax cuts, either, because revenue was up 8.6% as well. Companies are continually exceeding analyst expectations in both earnings and sales.

 

We usually think of inflation as a bad thing, but a little bit is actually good. The Federal Reserve says that the ideal would be to have 2% inflation. Well, we’re getting close, because right now it’s at 1.9%. Because of this, next year they are not going to be raising interest rates as quickly as they have been. That’s welcome news for anyone planning on borrowing money in the near future and should also help calm the stock market.

 

Ten Years From Now It Will All Be A Vague Memory

So, right now it seems that we are dealing with two polar opposites. The stock market is dropping but the economy is chugging along just as strong as ever. Is the sky falling or not?

 

I’m not a prophet, so I can’t tell you where things will be in six months or a year. The markets could recover and continue their upward trajectory for a couple more years. Or the economy could slow down into a recession. Either way, it’s no big deal.

 

Too many people get caught up in the momentary drama instead of taking a long-term view of things. That’s not healthy. If you’re investing in the stock market, it should be with a long time horizon. Any money you expect to need in the next five years should not be invested in stocks.

 

While the S&P 500 is down 17% since October, it’s still over 6% higher than it was 3 years ago and 10.5% higher than it was 10 years ago. If you take a look at the graph from Google below of the past 5 years, our current free fall isn’t nearly as impressive as the headlines make it out to be.

 

 

For our light and momentary troubles are achieving for us an eternal glory that far outweighs them all. (2 Corinthians 4:17)

 

I know there wasn’t a stock market when Paul wrote that to the Corinthians. But it’s a good reminder. Though there’s a lot of drama in the financial world right now, ten years from now it will all be but a vague memory. And, compared to our eternal purpose, it simply doesn’t matter.

 

Merry Christmas. Aren’t we blessed to have a savior?