Why Is the Stock Market Down? What to Do in 2026

Last reviewed: October 1, 2026

"Why is the stock market down today?" is one of the most common money questions people type into a search box. The answer changes daily, but the list of possible causes hardly changes at all. This guide explains that list, shows where to look up the cause yourself, and sets out what regulators say about how to behave when prices fall.

This article is general information, not investment advice. It is also not tax or financial advice; rules differ by country and personal situation.

The short list of things that move markets

Stock prices move when expectations change. A share is a claim on a company's future profits, so anything that changes how large those profits are expected to be, how certain they are, or how much investors will pay for them today moves the price. Almost every market-wide fall traces back to one or more of the ten drivers below.

A stock index, such as the S&P 500 or the FTSE 100, is an average of many share prices, usually weighted by company size. "The market is down" means that average fell. On any red day, plenty of individual shares still rise.

Expectations are what matter

Markets price in what investors already expect. By the time a jobs report or earnings release is published, professional investors have made a guess and traded on it. The price then moves on the gap between the result and the guess.

That is why headlines can seem upside down. A strong jobs report can send shares lower if it suggests rates will stay high. A company can report record profits and fall because investors hoped for more. Ask "compared with what was expected?" and most moves stop looking random.

How interest rates affect stock valuations

Higher interest rates tend to lower stock valuations because they reduce what future profits are worth in today's money, raise companies' borrowing costs and make safer investments more competitive. Lower rates tend to do the reverse.

Discounting, explained simply

Money in the future is worth less than money now, because money you hold now can earn interest. If a safe account pays 5% a year, $100 today becomes $105 in a year. Turn that around: $105 arriving in a year is worth $100 today. Working backward like this is called discounting.

Shares are valued, in principle, by adding up the cash a business is expected to pay its owners in future and discounting it back to today. When the discount rate rises, the value today falls, even if the expected payments do not change.

A fictional worked example

These numbers are invented purely to illustrate the arithmetic. They describe no real company, rate or market.

A single payment. Imagine a promise of $100 paid in 10 years. At a 3% discount rate it is worth about $74.41 today ($100 divided by 1.03 ten times). At 5% it is worth about $61.39. The promise did not change, but its value today fell by about 17.5%.

A growing stream. Imagine fictional Example Co, expected to pay owners $5 per share next year, growing 4% a year indefinitely. A standard shortcut values this as next year's payment divided by the discount rate minus the growth rate.

A one-point rise in the discount rate, from 8% to 9%, cuts the value by 20% with identical expected payments. Real valuation is messier, but the direction is the same.

The other channels

• Borrowing costs. Indebted companies pay more interest, leaving less profit for shareholders.
• Customer demand. Households facing higher mortgage and card rates spend less. Our guides to mortgage closing costs and debt consolidation cover those costs.
• Competition from bonds. When bonds and savings pay more, some money leaves shares.

Central banks set a short-term policy rate. Longer-term rates, such as 10-year government bond yields, are set in the bond market and reflect expectations for inflation, growth and policy. A sharp rise in yields can pull shares down on a day when the central bank said nothing.

Inflation data: CPI, PCE and why surprises matter

Inflation reports move markets because they shape what central banks do with interest rates. The two main US measures are the Consumer Price Index (CPI), published by the Bureau of Labor Statistics, and the Personal Consumption Expenditures (PCE) price index, published by the Bureau of Economic Analysis.

What CPI and PCE are

The BLS defines the CPI as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is published monthly on a date announced in advance, in the morning before US stock trading opens, which is why futures and bond yields can jump before the opening bell.

The BEA describes the PCE price index as a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. It appears monthly in the Personal Income and Outlays report. The BEA says it is similar to the CPI but constructed differently, so the two give different inflation rates.

PCE matters because the Federal Reserve's 2% longer-run inflation goal is stated in terms of the annual change in the PCE price index. The BEA also publishes "core" PCE, which excludes food and energy because those prices swing more sharply, and says it is closely watched by the Fed.

Why the surprise matters more than the number

Before each release, economists publish forecasts and traders position around the average, called the consensus. If inflation matches it, markets may barely move, even if the number is high. If it comes in above, investors conclude rates may stay higher for longer, yields tend to rise and shares tend to fall. Below, the opposite.

Jobs and GDP work the same way

GDP is quarterly, and the BEA releases an advance estimate, then a second and a third as more data arrives. Strong data is good for profits but may mean higher rates. Weak data may mean lower rates but raises recession worries. Which effect wins depends on what investors feared most beforehand, which is why "good news is bad news" applies in some periods and not others.

The Federal Reserve and other central banks

Central banks set short-term interest rates to keep inflation low and stable, and their decisions are among the most powerful market movers. In the US, the deciding body is the Federal Open Market Committee (FOMC).

The Fed's mandate and meetings

The Federal Reserve has a dual mandate: maximum employment and price stability. It states that inflation of 2% over the longer run, measured by the PCE price index, is most consistent with that mandate.

The FOMC has twelve voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four other Reserve Bank presidents on rotation. It holds eight regularly scheduled meetings a year, with dates published in advance. After each meeting it issues a statement and the Chair holds a press conference. Minutes follow three weeks after the decision, and some meetings include a Summary of Economic Projections.

Markets can move on the decision, a changed phrase in the statement, an answer at the press conference, the projections or the minutes. A fall on a day when the Fed left rates unchanged usually means its message pointed to a tougher path than investors had priced in.

Other major central banks in brief

Earnings season and why good results can sink a share price

A share can fall after "good" results because they were less good than investors expected, or because guidance about the future disappointed. Results are judged against expectations.

Listed companies report every quarter. Because most share similar quarter-ends, reports cluster into a few busy weeks known as earnings season, when a heavyweight company's results can move the whole index.

Five reasons a share falls on strong numbers

1. The bar was higher than the result. If profits grew 15% but investors had priced in 25%, the share can fall.
2. Guidance was cut or cautious. A share's value depends on the future, so a weak outlook can outweigh a strong quarter.
3. The quality of profit was poor. Profits from one-off gains or cost cuts are valued less than profits from growing sales.
4. A key number weakened. Investors may focus on margins or customer growth more than the headline.
5. The good news was already in the price. After a strong run-up, some investors sell once the news is confirmed.

The primary sources are the company's own announcement and its regulatory filings. In the US, quarterly and annual reports and current reports on Form 8-K are free to read on the SEC's EDGAR system. The company's own outlook and risk statements tell you more than a "beat" or "miss" headline.

Pullback, correction, bear market, crash and recession

A correction is generally a fall of at least 10%, and a bear market a fall of 20% or more in a broad index. The other terms have no agreed threshold. A recession is about the economy, not the stock market, and in the US it is identified by the NBER.

Corrections and bear markets are measured from a recent peak, and nothing changes mechanically when an index crosses either line. The labels are only certain in hindsight: on the day an index is down 9%, nobody knows whether it will recover next week or fall 30%.

A recession is not a bear market

A recession describes output, jobs, income and spending. A bear market describes share prices. They often overlap, but not always. Share prices look forward, so markets have often fallen before a recession showed in the data and begun recovering while the news was still bad.

The NBER's Business Cycle Dating Committee maintains the US chronology. It describes a recession as a significant decline in economic activity that is spread across the economy and lasts more than a few months, judged on depth, diffusion and duration. It weighs indicators such as real personal income less transfers, nonfarm payroll employment, real consumer spending and industrial production, with no fixed rule on weighting.

So the popular "two quarters of falling GDP" rule is not the NBER's definition. And because the committee waits for enough data, its announcements come well after the fact and are no use as a trading signal.

The arithmetic of losses and recoveries

Falls and gains are not symmetrical, because the gain is calculated on a smaller amount. This table is arithmetic, not a forecast.

Circuit breakers and limit up-limit down

US stock markets have automatic pauses that slow extreme moves. Market-wide circuit breakers halt all trading if the S&P 500 falls 7%, 13% or 20% from the previous close, and the limit up-limit down mechanism pauses individual stocks that move too far, too fast.

The NYSE explains that the thresholds are measured against the S&P 500's prior closing level and apply during regular trading hours, 9:30 a.m. to 4:00 p.m. Eastern Time. FINRA sets out what happens at each level.

These halts are rare. The NYSE notes that an industry working group reviewed how the mechanism operated during the market events of March 2020. The aim is not to stop prices falling but to give everyone a pause so prices are set in an orderly way.

Limit up-limit down for single stocks

According to FINRA, price bands are set a percentage above and below a stock's average price over the preceding five minutes. For shares priced above $3 in the S&P 500 and Russell 1000, the band is 5%. For other shares above $3 it is 10%, with wider bands for low-priced shares. If a share hits its band and the price does not move back within 15 seconds, trading in it pauses for five minutes.

• A market order entered in a panic can fill far below the last price you saw. Many investors use limit orders in volatile sessions.

Volatility and the VIX explained

Volatility is how much and how quickly prices move. The VIX is a Cboe index that estimates the volatility investors expect in the S&P 500 over the near term, based on option prices. It measures expected turbulence, not direction.

Cboe describes the VIX Index as a leading measure of market expectations of near-term volatility conveyed by S&P 500 Index option prices. It was introduced in 1993. Option prices rise when investors pay more for protection, so the VIX tends to rise when investors are nervous. Because shares usually fall faster than they rise, it typically jumps in sharp sell-offs, which is why commentators call it a "fear gauge". That is media shorthand, not an official name.

• It is about expectations. A high reading implies large moves ahead, up or down.
• It is not a timing tool. No level reliably signals "buy" or "sell".

For an ordinary investor the VIX is context. If it has jumped, big daily swings both ways are more likely for a while, which is a reason to slow down.

How to find out why the market moved on a given day

You can usually identify the main driver in about ten minutes by working through primary sources in order: scheduled data, central bank communications, bond yields and currencies, then company filings. This answers "why is the stock market down today" on any day you ask.

Step 1: check what was scheduled

• BLS release calendar: CPI, the Employment Situation report, the Producer Price Index and job openings.
• BEA release schedule: GDP and Personal Income and Outlays, which contains PCE.
• Federal Reserve calendar: FOMC dates, statements, press conferences, minutes and projections.
• Other central banks: the Bank of England, ECB and Bank of Canada publish their decision dates too.

If a major release came out that morning, read the agency's own summary. It is short, free and plainly written.

Step 2: compare the result with expectations

The release gives the number. To know whether it was a surprise, look at the forecast. Reputable news reports state the consensus beside the result. The gap is usually the story.

Step 3: look at bond yields and the currency

If government bond yields rose sharply, the fall in shares is probably about interest-rate expectations. If yields fell while shares fell, investors were probably seeking safety because of growth fears or a shock. A big currency move suggests money was moving between countries.

Step 4: read company filings

The SEC's EDGAR system gives free public access to documents filed by publicly traded companies, searchable by name or ticker, with full-text search. Look for:

• Form 8-K: the current report used to announce significant events between regular reports, such as results, major agreements or leadership changes.
• Forms 10-Q and 10-K: quarterly and annual reports with financial statements and risk factors.

Step 5: accept "no clear reason"

If nothing was scheduled, yields were calm, no large company reported and the move was small, there was simply more selling than buying. That is normal and needs no action from you.

How to read financial news critically

Financial news explains the past confidently and the future poorly. Use it to learn what happened and what was expected, and be sceptical of anything telling you what happens next.

• Explanations are written after the move. The same event can "explain" a rise one day and a fall the next.
• Points are not percentages. "Plunges 500 points" sounds dramatic. The percentage is what matters.
• "Wiped off the market" is not cash lost. Losses are realised only by people who sell.
• Check who is speaking. A fund manager praising a share may own it. An online account pushing a stock may be paid to.
• Beware urgency. Long-term decisions almost never need making within the hour.

What history shows about downturns and recoveries

History shows that declines are a normal, recurring part of investing in shares, that they have varied enormously in depth and length, and that broad, diversified markets have recovered from past downturns over time. It does not show when the next decline will end. Past performance does not guarantee future results.

We have left out statistics on average declines and recovery times. They depend heavily on the index, country and dates chosen and are easy to misuse. The qualitative lessons are sturdier:

• Falls are frequent. Anyone holding shares for decades should expect several bear markets.
• They are not alike. Some have ended within months, others have lasted years, and some national markets took a very long time to regain a peak.
• Recessions end. The NBER records each US recession as the period between a peak and a trough, followed by an expansion, and dates them in hindsight.
• Markets turn before the news does. Prices have often begun recovering while economic news was still worsening, so waiting for an all-clear is unreliable.
• Big moves cluster. Large daily gains have often come close to large daily losses. FINRA notes that investors who sell out of fear may miss gains when the market goes back up.

What individual investors should do

When stocks fall, the most useful actions are checks, not trades: confirm your time horizon, make sure your emergency fund is intact, review your asset allocation, and keep to habits such as rebalancing and steady contributions. These are the steps the SEC and FINRA emphasise.

1. Review your time horizon

The SEC explains that your time horizon, how long until you need the money, is one of the main things that should shape how you invest. If you will spend the money in 20 years, a fall this year changes little. If you need it next year, it arguably should not have been in shares, and the lesson is to fix the plan for future savings.

2. Check your emergency fund

The SEC notes that most smart investors keep enough in savings to cover an emergency such as sudden unemployment, and that some aim for up to six months of income. Market falls and job losses often arrive together, and a cash buffer means you are not forced to sell at low prices. The SEC also suggests paying off high-interest card debt first; see why credit cards can become a financial trap.

3. Review your asset allocation

Asset allocation means dividing a portfolio among stocks, bonds and cash. The SEC describes risk tolerance as your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. A falling market is the first honest test of it.

If the fall costs you sleep, your mix may hold more shares than suits you. But change a long-term allocation after calm reflection, not mid-panic. The SEC observes that savvy investors typically do not change their allocation based on the relative performance of asset categories.

4. Check your diversification

The SEC says a portfolio should be diversified between asset categories and within them. That will not prevent losses in a broad decline, but it limits the damage one company can do. The SEC specifically cautions against investing heavily in your employer's stock or any single stock.

5. Rebalance on your normal schedule

Rebalancing means returning your portfolio to its intended mix. The SEC describes three ways: sell what is overweight and buy what is underweight, buy new investments for the underweight category, or direct new contributions to it. Some people rebalance every six or twelve months, others when a holding drifts past a set percentage. After a fall it means buying what just dropped, which is why a rule set in advance helps. Consider trading costs and taxes first.

6. Keep investing regularly (dollar-cost averaging)

FINRA describes dollar-cost averaging as investing equal portions at regular intervals, regardless of market conditions. Payday contributions to a workplace plan already do this.

A fictional illustration. You invest $200 a month for five months at invented unit prices of $20, $16, $10, $16 and $20. You buy 10, 12.5, 20, 12.5 and 10 units: 65 units for $1,000. The average price was $16.40, but your average cost is about $15.38, because you bought more units when prices were low. At $20, the units are worth $1,300. Had the price stayed low, you would show a loss.

Dollar-cost averaging does not guarantee a profit. FINRA notes the trade-off that you may miss gains while part of your money waits in cash, but also that it can remove some emotion and help you avoid impulsive decisions.

7. Avoid panic selling and market timing

FINRA defines panic selling as offloading large amounts of shares during a feared decline without careful analysis. Selling "until things calm down" needs two correct decisions: when to get out and when to get back in. Prices have usually risen well before the news feels safe, so selling low and buying back higher makes a paper loss permanent.

This does not mean "never sell". Selling can be right if your circumstances changed, you need the money soon or your allocation was wrong for you. The test is whether the decision comes from your plan or from the headlines.

Tax-loss harvesting and the wash sale rule

Tax-loss harvesting means selling an investment at a loss in a taxable account so the realised loss can offset capital gains. In the US, the wash sale rule blocks the deduction if you buy the same or a substantially identical security within 30 days before or after the sale. This is a general description of US rules, not tax advice.

According to the IRS, if capital losses exceed capital gains, the excess you can claim against other income is limited to $3,000 a year, or $1,500 if married filing separately. A larger net loss carries forward to later years. Assets held more than one year are long-term; one year or less is short-term. Limits can change, so confirm current figures with the IRS.

How the wash sale rule works

• The window runs both ways: 30 days before the sale and 30 days after.
• The disallowed loss is added to the cost basis of the replacement shares, so the benefit is postponed, not lost.
• Purchases by your spouse count, and so do purchases in your IRA.
• Whether securities are "substantially identical" depends on the facts.

A fictional illustration. You buy 100 shares of an invented company at $50 ($5,000) and sell at $40 ($4,000), a $1,000 loss. Two weeks later you buy 100 shares at $42 ($4,200). The loss is disallowed for now and added to the new basis: $4,200 plus $1,000 is $5,200, or $52 a share.

Cautions

• It applies only to taxable accounts, not to losses inside retirement accounts.
• The UK and Canada have their own rules on repurchasing after a loss. Check HMRC or Canada Revenue Agency guidance.

What not to do when stocks fall

The fastest ways to turn a temporary market fall into a permanent personal loss are borrowing to invest, using leveraged or inverse products you do not fully understand, chasing tips, and paying anyone who promises to recover your losses.

Do not rely on margin

Buying on margin means borrowing from your broker to buy securities. It magnifies losses as well as gains. FINRA explains:

• Under the Federal Reserve's Regulation T, firms can generally lend up to 50% of the purchase price of eligible stocks.
• Your equity must stay at or above 25% of the securities' market value, the maintenance requirement. Firms often set higher "house" requirements, such as 30% or 40%, and can raise them at any time.
• Firms do not have to issue a margin call before selling securities in your account, and you cannot choose what is sold.

A fictional illustration. You buy $10,000 of shares with $5,000 of your own money and a $5,000 loan.

A 30% fall wipes out 60% of your own money, before interest. With a 25% maintenance requirement, the account breaches it once the shares are worth less than about $6,667, a fall of roughly 33%. Shares may then be sold at low prices whether you agree or not, removing your chance to benefit from any recovery.

Be careful with leveraged and inverse ETFs

Leveraged funds aim to deliver a multiple of an index's return, and inverse funds the opposite. FINRA explains that most reset each day, meaning they are designed to achieve their objective on a daily basis, and that over longer periods results can differ significantly from it. FINRA's guidance is that they typically are inappropriate as an intermediate or long-term investment for retail investors.

A fictional illustration. An index at 100 rises 10% to 110, then falls 10% to 99: down 1%. A fund delivering twice the daily move rises 20% to 120, then falls 20% to 96: down 4%, not 2%. In choppy markets this gap can grow large.

Do not chase tips

Falling markets produce a flood of confident advice. A tip from a forum, group chat or video is not research, and the person giving it may profit from your buying. The SEC advises checking answers with an unbiased source before investing. If you cannot explain how an investment makes money and what could go wrong, do not buy it.

Watch for "recovery" scams and fake gurus

Fraudsters follow losses.

• Recovery scams. The CFTC describes these as advance-fee fraud: victims are told lost funds can be recovered if they first pay taxes, fees or a retainer. The same group may be behind both the original scam and the "recovery". The CFTC states that the government will never email, call or text you demanding money.
• Unsolicited contact. The CFTC and the UK's FCA both warn about approaches from people you never contacted. The FCA adds pressure to act quickly, unrealistic returns and "exclusive" offers as red flags.
• Fake gurus and signal groups. Be sceptical of anyone selling courses, "signals" or managed accounts on the strength of profit screenshots, which are easy to fake.
• "Guaranteed" returns. No legitimate investment can guarantee to make back your losses.

Check any firm with the regulator directly, typing the web address yourself. The warning signs match those in our guides to spotting a crypto scam and avoiding loan scams and fake offers.

Retirees and near-retirees: sequence-of-returns risk

Sequence-of-returns risk is the danger that poor returns arrive early in retirement, just as you begin withdrawing. Withdrawals during a slump come from a shrunken portfolio, leaving less to benefit from a recovery. The same average return can produce different outcomes depending on the order of good and bad years.

A small fictional example. Two retirees each start with $500,000 and withdraw $25,000 at the end of every year. Both get one year of -20% and two years of +10%. Only the order differs.

Retiree A, who met the bad year first, ends with $401,250. Retiree B ends with $417,000, a gap of $15,750 after three years with identical returns and withdrawals. With no withdrawals, both would hold exactly $484,000, because order does not matter when no money is taken out. Over a 25-year retirement with larger falls, the gap can decide whether money lasts.

How people manage this risk

These are general approaches, each with trade-offs, not recommendations.

• Hold a cash reserve covering a year or more of spending, so you are not forced to sell shares in a slump.
• Reduce risk gradually in the years around retirement.
• Be flexible about withdrawals, taking a little less in bad years.
• Build guaranteed income from state and workplace pensions or annuities, which have their own costs.

What a falling market means for 401(k) and IRA savers

For someone still contributing, a falling market lowers the balance on paper but also lowers the price of every new contribution. The loss becomes real only for shares that are sold.

• Decades from retirement: your future contributions probably matter more than your current balance, and each one now buys more units. The main risks are stopping contributions, giving up the match, or moving to cash and missing the recovery.
• Close to retirement: sequence risk applies. Check that your mix matches when you will start withdrawing. Target-date funds shift toward bonds and cash over time but differ in how much they hold in shares, so check what yours owns.
• Do not treat the account as a cash machine. Taking money out early can trigger income tax and penalties.
• Mind the wash sale rule. Selling at a loss in a taxable account and buying the same security in your IRA within 30 days is a wash sale.

Protections: SIPC vs FDIC and what they do not cover

No scheme protects you against investments falling in value. SIPC protects customers if a member brokerage firm fails and assets are missing. FDIC insurance protects deposits if an insured bank fails.

SIPC says its protection covers the custody function of the broker: restoring securities and cash missing from customer accounts when a firm is liquidated. It states plainly that it does not protect against a decline in the value of your securities. If your broker fails and SIPC steps in, you get your shares back at whatever they are then worth, not what you paid.

The FDIC is explicit that stocks, bonds, mutual funds, crypto assets and annuities are not insured, even when bought through an insured bank. Ask your brokerage how uninvested cash is held, and confirm its membership on the scheme's own website.

Notes for UK and Canadian readers

The drivers of market moves are the same everywhere, but the institutions, tax wrappers and protection schemes differ.

United Kingdom

• Central bank. The Bank of England's Monetary Policy Committee sets Bank Rate to meet the Government's 2% inflation target and announces decisions eight times a year.
• Regulator. Almost all UK financial services firms must be authorised or registered by the Financial Conduct Authority. Use its Firm Checker. The FCA warns that recovery room scams target previous victims.
• Protection. The FSCS can pay up to £85,000 per person, per firm, when an authorised investment firm has failed. It cannot accept claims for poor investment performance.
• ISAs. GOV.UK lists four adult ISA types (cash, stocks and shares, innovative finance and Lifetime) with a combined £20,000 allowance for the 2026 to 2027 tax year. Selling in a panic and withdrawing can use up allowance you cannot always replace.

Canada

• Central bank. The Bank of Canada targets 2% inflation, the midpoint of a 1% to 3% range, announces its rate on eight fixed dates a year and publishes a Monetary Policy Report four times a year.
• Protection. CIPF covers missing property at an insolvent member firm: C$1 million for general accounts combined (including TFSAs), C$1 million for registered retirement accounts such as RRSPs and RRIFs, and C$1 million for RESPs. It does not cover market losses.

If you hold shares priced in another currency, your return includes the exchange rate move, and conversion charges add up. See our guide to foreign transaction fees.

Common myths about falling markets

Many widely repeated beliefs about market falls are wrong or half right. These cause the most damage.

• "The market fell, so the economy is in trouble." Shares can fall because rates are expected to rise in a strong economy.
• "A recession means two quarters of falling GDP." The NBER uses a broader definition and decides after the fact.
• "I have lost money." A loss is realised only if you sell, though not every single share recovers.
• "The VIX tells you when to buy." It measures expected volatility, not direction.
• "Circuit breakers stop the market falling." They pause trading. Prices can fall further afterwards.
• "SIPC or the FSCS will cover my losses." They cover firm failure, not market falls.
• "It always comes back quickly." Recoveries have taken anywhere from months to many years.

A calm-down checklist for a red day

Run through this list before you touch a trade button. Most days you will finish having done nothing, which is usually the right result.

• Check the actual percentage against the definitions of pullback, correction and bear market.
• Find the driver: a data release, a central bank decision, earnings or bond yields.
• Ask whether your own life has changed. If not, the plan probably should not either.
• Confirm your emergency fund is intact.
• Look at your allocation, not your balance.
• Check for concentration in one company, sector or your employer's stock.
• Keep automatic contributions running.
• Wait a full day before any sale, and write down why you want to sell and when you would buy back.
• Use limit orders if you do trade.
• Ignore unsolicited offers to recover losses or share "signals".
• Close the app.

FAQ

Why is the stock market down today?

The most common reasons on any day are a surprising economic release (inflation, jobs or GDP), a central bank decision or comment, rising bond yields, disappointing earnings or guidance from large companies, or a geopolitical shock. Check the BLS and BEA calendars, the Federal Reserve's calendar and company filings on SEC EDGAR, then see whether bond yields moved. If nothing stands out and the move is small, it is probably ordinary noise.

Should I sell when the market drops?

A market drop alone is not a reason to sell. Selling locks in the loss and leaves you to decide when to get back in. FINRA notes that investors who sell out of fear may miss the gains when the market recovers. Selling can make sense if your circumstances changed, you need the money soon, or your portfolio is riskier than you can live with.

How long do bear markets last?

There is no fixed length. Some have ended within months and others have lasted years, and the time to regain the previous peak has varied even more. Plan on the basis that money in shares may sit below its starting value for several years, which is why money needed soon generally does not belong in shares.

Is my money safe if my broker fails?

In the US, SIPC protects customers of failed member firms up to $500,000, including up to $250,000 for cash, when assets are missing. The UK's FSCS can pay up to £85,000 per person, per firm. Canada's CIPF covers up to C$1 million per account category. None protects against a fall in market value.

What is the difference between a correction and a bear market?

By convention, a correction is a decline of at least 10% from a recent high and a bear market is a decline of 20% or more in a broad index. They are labels, not triggers.

Does a falling stock market mean a recession is coming?

Not necessarily. Markets have fallen sharply without a recession following. In the US, recessions are identified by the NBER from employment, income, spending and production data, and only after the fact.

Why do stocks fall when interest rates rise?

Higher rates reduce the value today of future profits, raise borrowing costs, slow spending and make bonds more attractive. In our fictional example, raising the discount rate from 8% to 9% cut the value of an unchanged payment stream by 20%.

What happens when a circuit breaker is triggered?

If the S&P 500 falls 7% or 13% from the prior close before 3:25 p.m. Eastern Time, US stock trading halts for 15 minutes. At 20%, trading stops for the day. Orders are not executed during a halt.

Is it a good time to buy when the market is down?

Nobody can know in advance. Lower prices mean each amount invested buys more, but prices can fall further and stay low. Regular investing on a schedule avoids guessing. Only invest money you will not need for years, and never borrow to do it. We do not make buy or sell recommendations.

Should I stop my 401(k) or pension contributions during a downturn?

For most people years from retirement, stopping means giving up any employer match, which the SEC calls free money, and missing lower prices. If your budget is under real strain, protecting your emergency fund comes first.

Can I use market losses to reduce my US tax bill?

In a taxable account, realised losses offset gains, and up to $3,000 of excess loss a year ($1,500 if married filing separately) can offset other income, with the rest carried forward. The wash sale rule disallows the loss if you rebuy within 30 days before or after the sale.

Someone offered to recover my investment losses. Is that legitimate?

Treat it as a scam. The CFTC warns that recovery offers asking for fees, taxes or a retainer up front are advance-fee fraud. Do not pay or share account details, and report the contact to your regulator.

Bottom line

The stock market goes down for a short, repeating list of reasons: interest rates and bond yields, inflation and other economic data, earnings and guidance, shocks, and the behaviour of investors themselves. Prices move on the gap between what happened and what was expected. Once you know where the official calendars and filings are, you can work out the likely cause of almost any move yourself.

What you do matters more than why it happened. Know your time horizon, keep an emergency fund, hold a diversified mix that fits your risk tolerance, rebalance by rule, keep contributing, and avoid panic selling, borrowed money, leveraged products and anyone promising to win your losses back. Past performance does not guarantee future results.

This article is general information, not investment advice. If you are unsure, consider speaking to a regulated financial professional.

Official sources referenced in this guide

• Federal Reserve - Federal Open Market Committee
• Federal Reserve - FOMC meeting calendars and information
• Federal Reserve - Why does the Federal Reserve aim for inflation of 2 percent over the longer run?
• Bureau of Labor Statistics - Consumer Price Index
• Bureau of Labor Statistics - Economic news releases
• Bureau of Economic Analysis - Personal Consumption Expenditures Price Index
• Bureau of Economic Analysis - Prices and inflation learning center
• Bureau of Economic Analysis - Gross Domestic Product
• National Bureau of Economic Research - Business cycle dating
• FINRA - Key Terms for Tough Times: The Vocabulary of Stressed Markets
• FINRA - Guardrails for Market Volatility
• FINRA - Know What Triggers a Margin Call
• FINRA - Dollar-cost averaging
• FINRA - Non-Traditional ETFs FAQ
• NYSE - Trading information and market-wide circuit breakers
• Cboe - VIX Index
• SEC - Beginners' Guide to Asset Allocation, Diversification, and Rebalancing
• SEC - Ten Things to Consider Before You Make Investing Decisions
• SEC - EDGAR: search filings
• IRS - Publication 550, Investment Income and Expenses
• IRS - Topic no. 409, Capital gains and losses
• SIPC - What SIPC protects
• FDIC - Deposit insurance
• FDIC - Financial products that are not insured by the FDIC
• CFTC - Customer advisory on follow-on and recovery frauds
• Bank of England - Monetary policy
• European Central Bank - Monetary policy
• Financial Conduct Authority - Protect yourself from scams
• Financial Services Compensation Scheme - Investments
• GOV.UK - Individual Savings Accounts (ISAs)
• Bank of Canada - Monetary policy
• Canadian Investor Protection Fund - About CIPF coverage