Like NASCAR Racing, the Stock Market Needs Pit Stops Notice
NASCAR races will see drivers making between 5 and 8 pit stops during each race. There is simply no way for drivers to push their cars to these extreme levels for an entire race without stopping to refuel, change tires, or make other mechanical adjustments. Otherwise, there could be serious consequences.
Pit stops also occur in the stock market. They come in the form of retracements, withdrawals or corrections. There are two types of pit stops in the stock market – time or price. When the stock market consolidates (moves sideways) over several weeks or months, it makes a pit stop. This is when the stock market simply takes a break and the price stays in a range. Investors may feel like they are getting nowhere during these pit stops. Once the pit stop is over, the stock market may have a chance to resume the bullish or bearish race.
The second type of pit stop is lower prices. It is not fun. The price drop can last for weeks, maybe months, leading investors to wonder if they shouldn’t just give up on the race.
Whatever type of pit stop is taken, they are necessary. The stock market just needs a break sometimes or, like a NASCAR race, there could be serious consequences. Look at the story. It was during some of the worst times for the stock market that some of our biggest companies were created. After the great panic of 1907, UPS started up and General Motors started up the following year. Fortune magazine was launched 90 days after the stock market crash of 1929. Walt Disney also began during the Great Depression. Charles Schwab opened his first investment branch in 1975 just after the horrific bear market of 1973-1974. There are a lot of other examples I could cite, but you understand. Stock market pit stops don’t necessarily end the race for investors as they could give them more room to attract more people into the race.
At some point, we all know this uptrend will end. They still do. But as long as the Federal Reserve continues to hold interest rates at 0%, the bull market can continue. Of course, this does not mean that there will be no withdrawals and corrections.
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