The stock market has not strung together two losing days in a row in a while. Not just two losing days, but two triple digit losing days at that. The worst of the days happens to be how things are shaping up in the markets today. The Dow Jones Industrial Average has fallen by as much as four-hundred points throughout the day. This is the kind of move that we have not seen since June of 2016 says CNBC.
Naturally, alarm bells have been going off for some people who are afraid that perhaps this market got a little too far out over its skis. It is definitely something that is a possibility as price to earnings (PE) ratios have climbed to levels that are much too high for normal markets. While a typical PE ratio for the whole market might be in the high teens, lately it has climbed to over thirty.
When the market gets overinflated like this, and prices are just climbing through the roof, it is easy for people to want to put their own money in the market as well. There is the classic fear of missing out (FOMO) feeling that can overcome some people. As soon as those characters start to put their money in the market, you know that the rally has almost come to an end. They are always the ones who are left holding the bag while everyone else who has already made their money carries on their way.
It is far too early to say that we are definitely in some kind of decline at this point. There are other possibilities that could come into play here. Already, some are getting defensive about this move and say that it makes for a great opportunity to purchase more. It sort of depends on where you think the market is headed in the long-term.
A lot of people have already made their money, and they might go ahead and make a quiet exit from the market. When they start to pull their funds, declines like this become all the more possible. Make sure that you have some guts of steel if you are ready to dive in head first into a market that has fallen as much as it has at this point.