Jeremy Glaser: Stocks dropped sharply again on Thursday with the Dow off 4% for the second time this week and the S&P 500 off almost as much. The Dow is now in correction territory; it's off 10% from the high seen in late January. Although never pleasant, this correction shouldn't come as an enormous surprise and is a normal part of stock investing.
So what's causing this big move? The most cited reason is that there's concerns about inflation that lead to concerns about higher rates and the impact that could have on the stock market. We had a chance to talk to Mihir Worah of PIMCO today to get his take on inflation, and he thinks that these concerns have a lot of validity. When you look at the increase in wages and the wage inflation and add in the stimulus from the tax cuts, from any potential infrastructure spending, as well as the extra spending from the budget deal being reached in Washington, you could see how price levels could rise faster than expected. However, he doesn't see this as a concern or as a reason to move out of the market. He sees stocks as reasonably valued today, though he does caution investors to think about downside and some tail risks.
So what should investors do? We think the best advice is for those that really do have their asset allocation under control and their financial plan under control, to safely tune out the short term noise.