With global stock markets imploding and the Dow industrials plunging 550 points in the blink of an eye, some average investors might be frightened into selling everything.
Don’t do it, warns Vanguard Group founder Jack Bogle.
"Just stay the course. Don't do something, just stand there. This is speculation that we're seeing out there, and you can't respond to it," the investing legend told CNBC.
U.S. stocks slumped Wednesday as the price of oil suffered its worst one-day drop since September. A huge sell-off earlier in the day pushed the Standard & Poor's 500 index to its lowest level in almost two years.
Investors are worried that low oil prices mean there's not that much demand for fuel. That would be a sign that growth in the global economy is slowing down. Stocks in the U.S. started sharply lower, following widespread selling overseas, and at one point the Dow Jones industrial average fell as much as 565 points, the AP
After a late recovery, the Dow closed down 249.28 points, or 1.6 percent, to 15,766.74. The S&P 500 index fell 22 points, or 1.2 percent, to 1,859.33. The Nasdaq composite, which briefly turned positive in the afternoon, lost 5.26 points, or 0.1 percent, to 4,471.69.
"In the short run, listen to the economy; don't listen to the stock market," he said. "These moves in the market are like a tale told by an idiot: full of sound and fury, signaling nothing," he said.
"Each bubble, for lack of a better word, is different from the previous bubble. The dotcom bubble back in 1999 into the beginning of 2000 was a whole lot of ridiculously overpriced new companies, only probably 15 percent of which made it," Bogle said. "The mortgage bubble was because a lot of people had mortgages, and weren't able to pay for them," he said.
In the short term, however, Bogle said: "Nothing has changed."
Wednesday's market rout was across the board: all 30 Dow components and all 10 major S&P sectors were in the red, with nine down more than 2 percent. The New York Stock Exchange recorded 1,387 stocks hitting new 52-week lows, while 866 sank to new lows on the Nasdaq, the most on a single day since Aug. 24 for both exchanges.
But a late-day bounce in U.S. oil prices helped reduce losses in stocks.
"For your average investor, when they see today's news, it's going to spur some angst and the big question that everybody has is 'Should I be in cash?'," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, told Reuters.
"The fear is 'Is tomorrow going to bring more selling?' People are not even thinking about today, they're thinking about tomorrow," she said.
(Newsmax wire services contributed to this report).
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