Don't Let the Shaky Dow Get You Down

Don't Let the Shaky Dow Get You Down

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After a nice rally throughout much of September, the stock market continued its recent reversal, giving up more ground as a litany of short-term fears hit investors. Suddenly, everyone's paying close attention to the Oct. 1 deadline for a continuing resolution to fund government spending, raising near-panic about the impact of a possible shutdown of the federal government. Moreover, weaker consumer confidence figures point to a potential erosion of future optimism in consumers' expectations. By 10:45 a.m. EDT, the Dow Jones Industrials had recovered from losses of as much as 60 points, inching upward by five points as the broader market also made a comeback.

Even with the recovery, the Dow has fallen 275 points in less than a week. But it's important not to let pessimism over short-term events derail your long-term strategy. Past confrontations over the budget have usually been resolved without need for a government shutdown, and even the rare occasions on which a shutdown occurred didn't lead to lasting damage. If anything, a drop based on those fears could present a bargain for opportunistic investors.

Boeing is one example of how investors are sticking with a long-term view. The stock is up 1.3%, even though the South Korean government chose not to move forward with a purchase of 60 Boeing F-15 fighters. The move was a surprise, given that Boeing was the only remaining bidder for the government contract, but South Korea argued that the fighter wasn't advanced enough to handle threats from North Korea. Still, investors took the announcement in stride, looking instead at views from rival Airbus pointing to a doubling of the world's fleet of aircraft over the next 20 years. With such strong support for its business, Boeing should have growth opportunities despite occasional contract losses.

New Dow component Nike has also pushed higher today, rising three-quarters of a percent. The company announces earnings later this week, but already the athletic shoe and apparel giant is drawing positive attention from a number of analysts. With its ability to pass through price increases even in tough economic environments and the coming beginning of basketball season, Nike has the power to overcome weak overall consumer confidence and sustain its strength even when investors are worried.

Nevertheless, you have to be on the lookout for threats to companies' long-term business models. Visa has fallen 0.5% as investors fret about pressure from regulators both in the U.S. and elsewhere around the world to reduce processing fees. New French rules will force Visa and rival MasterCard to cut their interbank fees on transactions within France almost in half and will also reduce fees on ATM transactions by 27%. The prevailing regulatory trend seems geared toward cutting Visa's and MasterCard's ability to sustain wide margins, and so long as that persists, it could be hard for those stocks to maintain their massive long-term gains of the past several years.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends MasterCard, Nike, and Visa. The Motley Fool owns shares of MasterCard, Nike, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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