After two days of pretty steep declines, the stock market finally stabilized today. The Dow Jones Industrial Average (INDEX: ^DJI) fell 0.1%, but the broader market was mixed. Small-cap stocks fell more sharply, but the Nasdaq Composite (INDEX: ^IXIC) was up 0.4%, and the S&P 500 (INDEX: ^GSPC) was down less than a point. Gold and oil prices both rose sharply, while bond yields and the U.S. dollar fell.
Is more downside coming?
With the Dow now having fallen three days in a row, some investors are starting to wonder whether a larger correction is imminent. With most of the major benchmarks having traded at multiyear highs for some time, the last thing anyone wants to do is give back hard-earned profits.
But even if a correction is coming -- and eventually it will -- you shouldn't let it have a marked impact on your investing strategy. Keep in mind that just six months ago, the Dow traded below 10,700. Even a full 10% correction for the Dow from its recent highs would leave the average with more than a 10% gain from those October lows.
More importantly, not every stock you own will respond the same way to an overall market decline. During 2008, when the S&P 500 fell 37%, Dow stalwarts McDonald's (NYS: MCD) and Wal-Mart (NYS: WMT) managed to gain ground, as the bad economic conditions that sent much of the stock market for a loop benefited their particular business models. That's no guarantee that they'll be winners in any future correction, but you will be able to find some stock that successfully navigates changing conditions to create profit opportunities for investors.
So as the three-day weekend begins, don't let yourself be nervous about the potential for a steeper decline for the stock market. Stocks will rise and fall, but over time, you can still find investments that will deliver the returns you need.
In fact, a long-term mindset is essential for finding the best possible returns. Tune into The Motley Fool's special report on retirement to discover the names of three promising stock picks for long-term investors. Get your free report today before it's gone forever.
At the time thisarticle was published Fool contributorDan Caplingerdoesn't own shares of the companies mentioned. You can follow him onTwitter. The Motley Fool owns shares of Wal-Mart.Motley Fool newsletter serviceshave recommended buying shares of McDonald's and Wal-Mart, as well as creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool has adisclosure policy.
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