News that consumer prices rose 0.8% in April stoked fears of uncontrolled inflation that could prompt the Federal Reserve to take drastic action that would endanger the economic recovery.
As nasty as today’s drop looked, though, the reality isn’t that bad.
Daily moves of 1%, 2%, or even 3% simply aren’t all that uncommon when you look back at stock market history, and if anything, the markets have been less volatile over the past decade than they were back when index levels were much lower.
Indexes reached those levels for the first time ever just earlier this year, leaving intact a huge portion of their past gains.
Inflation numbers might have been higher had it not been for a short lull in rising gasoline prices, which helped the energy index fall 0.1% during April.
The economy has seen unprecedented disruptions, and it’s natural that prices are going to go through some perturbations to readjust to conditions slowly heading back toward normal.
It’s hard to endure stock market drops, but it’s easier when you know most investors are selling for the wrong reasons.