Three cheers for the plunging stock market

For the past six years, stocks have been going up. Now, they’re going down. Is it time to panic? Not at all. It’s time to cheer!

1. Hip!

The level of the stock market is dutifully recorded in almost every newscast, as though it matters in and of itself. But the stock market is not the economy, which is going to be fine even if the market goes down. Instead, it’s a measure of wealth: How rich rich people are. If the rich are getting a little bit poorer, that’s fine: It means reduced inequality, and an ever so slightly more level playing field for everybody else.

2. Hip!

Stocks are what are known as “asset prices”. Young people tend not to own a lot of stocks, but there’s one big asset they do want to own, which is a house. The problem is that houses always get sold to the highest bidder, and right now the highest bidder is likely to be someone with a lot of stocks they can liquidate for a down-payment. If stocks fall in value, that could finally help housing become a little bit more affordable. It might even delay interest rate hikes, keeping mortgage rates low.

3. Hooray!

Anybody under the age of about 55 or so should want stocks to be low, not high. If you’re in your working/earning years, then you’re either saving for retirement already, or you hope to be able to do so soon. And when you’re saving for retirement, you want stocks to be as cheap as possible, so that you’ll  have as many of them as you can when you finally do retire. The best time for stocks to rise is right as you’re retiring. The worst time for stocks to rise is early on, when you’re buying them up and when they no longer have as much room to appreciate in value. So, don’t think of this as a stock-market crash. Think of it as stocks going on sale.