After setting record highs in January, the most severe stock market decline in two years took aim at Oklahoma Christian University’s Student Investment Fund.
Beginning on Feb. 5, the Dow Jones Industrial Average and Standard and Poor’s 500 index dropped a combined 5.2 percent over five days, costing investors worldwide $5.2 trillion dollars. Investments Club member Connor Burch said the overall profits from the $65,000 Student Investment Fund is now about two percent since December, a 50 percent decrease from two weeks ago.
Investment Officer Carson James said efforts to keep the club’s assets varied across several different sectors prevented them from seeing major losses. The club has a policy not to invest more than 10 percent of their total portfolio into a single industry, President Stephen Amalong said last month.
“We are well diversified across different industries, which protects us from getting hurt too badly, but it can also prevent us from taking substantial gains,” James said. “[The fund] is more suited for long term growth and preservation.”
Because the club had evenly spread out their funds, Burch said members were pleasantly surprised when they met last Thursday for their weekly meeting.
“We were pretty happy with how our portfolio was doing,” Burch said. “We were all expecting it to be down a little more than it actually was, but since we diversified, we ended up doing pretty well for ourselves.”
According to Burch, the club knew their stocks would eventually see a decline because they were purchasing in a rising market. He said the rate at which the stock market was rising caught his attention over the past couple of months.
“We have been in the second, longest bull market in history,” Burch said. “I saw the stocks keep going up and up, and I knew eventually there was going to be a correction. It was crazy how much the numbers were going up.”
James said the news of the sudden decline was not surprising because the stock market often adjusts when it is valued too high or low.
“The market is correcting itself,” James said. “I’m not saying it’s in a total bear market and it’s going to completely collapse. All it was is the market was overvalued, and now it is being corrected to a value people think is accurate.”
According to experts, a possible motive for the steep decline seen Feb. 5 is a monthly jobs report the U.S. Department of Labor released Feb. 2. While the economy had added 200,000 jobs and wages had increased by 2.9% in January, many on Wall Street interpreted the results of the report as a possible warning sign of rising inflation.
“At the moment, inflation is very tame at just 1.7 percent,” The Washington Post said in an article published last Monday. “But the wage data [Feb. 2] spooked investors into thinking inflation could rise quickly this year as the tax cuts take effect and more and more companies start raising pay and prices.”
Burch said the overall morale of the club is high despite the recent setback, and the group is looking forward to making adjustments when needed.
“I think this is just a bump in the road,” Burch said. “Also, with the stock market going down, it gives us an opportunity to buy stocks when they are low. I’m excited for it. I don’t think it’s going to be a big issue.”
As of Feb. 13, the Dow sits at 24,542.98 points, rising 682.52 points from the 23,860.46 point monthly low the market saw Feb. 8. The Student Investment Fund’s overall profits dropped to a low of one percent Friday, Feb. 9 before rebounding back to around two percent on Monday, Burch said.
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