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Why Are We Seeing A Sea Of Red In The Market Lately?

Looking at the 30 constituents of The Straits Times Index (SGX: ^STI) today, I realized that 26 out of the 30 companies are trading in the red (i.e. prices are falling) today. Today has not been an unusual day, in fact, we have been seeing a sea of red for the past 2 weeks.

What has happened since the middle of September? More importantly, what does it mean for investors?

The Straits Times Index has fell about 2.5% from its peak in September to the currently level of 3,263.89. It seems the world is once again worried about the crisis in Ukraine, that the Federal Reserve might be raising interest rates soon, the war in the Middle East, the slowdown in China, and the latest demonstration in Hong Kong.

These hardly seems like new challenges and yet market has turn bearish nonetheless. So is there any logical explanation for it?

You might hear many reasons through mainstream media, with different experts each providing their own reason why the market has turned bearish. But at the end of the day, this is just the nature of the market. Mr. Market is and will always be an erratic and emotional participant in the stock market. If we continuously try to rationalise and explain the short term market movement, we might fall into the trap of becoming irrational ourselves.

Warren Buffett has always reiterated that the market should be there to serve you, not to instruct you. Instead of worrying about what the market is going to be in the next few weeks, we might benefit more if we ask ourselves how are the business fundamentals of the business we are interested in doing. For example, how would the business of CapitaLand Limited (SGX: C31) be like in the next 10 years? If you are confident on the business in the long term, should short term volatility in the market really frighten you?

Foolish Summary

Markets go up and down. However, the goal of investing is never to guess the market correctly, but rather to own portion of businesses that you are confident and comfortable in associating yourselves with for the long term. Markets can be erratic at times, but you have a choice to follow it or take advantage of it. Use that choice wisely.

The amount of bargains in Singapore’s share market is an important piece of news for you as an investor – but it’s also not the only interesting and important development about our local market you should know about. To keep up to date with what’s exactly happening in today’s market, click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Take Stock Singapore can also show how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any company mentioned above