Lessons of the Debt-Ceiling Crisis

Posted on October 21, 2013
Filed Under Fidelity mutual funds, Investment Strategy, Personal Investing, The Economic Scene

The debt-ceiling crisis is over, at least for now. And that means a respite from daily headlines full of words like “crisis,” “default,” “disaster” and “cataclysm.”

As always, alarming headlines intimidate many investors into making bad decisions. But I am happy to report that, in our office at least, there were far fewer phone calls from panicked investors than during similar turmoil in the past.

In fact is that markets are volatile. The rollercoaster of the past few weeks may have been scary, but the market’s swinging emotions belied the fact that the long-term prospects for the American economy remain strong. Even amid the hysterical headlines, the country has been making a slow, steady recovery. Recent U.S. data on everything from employment to manufacturing to consumer spending remain encouraging, and perhaps best of all, inflation remains low. The fact remains that the United States has the strongest, most resilient economy on earth. And now there are signs that the rest of the global economy appears to be recovering as well.

That doesn’t mean market volatility is over. In fact there’s a good chance that government gridlock will prompt a re-run of those alarming headlines within a few short months.

But if and when that happens, it will be critical to keep things in perspective.

Our country has come through countless financial crises over the years—and it will continue to face them and overcome them in the future. Consider that today the Dow Jones Industrial Average is about 9% higher than it was at its real estate-bubble peak of October 9, 2007.

If you stayed invested in your Fidelity mutual funds, the market’s relentless engine has made you whole and then some. If you followed your fear and sold out at the wrong time during the market crash, you’re probably still trying to get back to the starting line. Remember that in the past, over time, the market has always gone up.  We expect that to be true for the future as well – but only for those intrepid souls who stay in the game.

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