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To cope with black swan events - hang in there

By Charles Shi | China Daily | Updated: 2018-02-14 07:50

As the United States' economy has recovered in the wake of the 2008 global financial crisis, the US Federal Reserve has gradually raised interest rates. As a result, rates have risen from 0.25 percent in December 2008 to their current 1.5 percent. Although each increase had an initial negative impact on the stock market, every downturn has been accompanied by a subsequent rebound due to an influx of large buy orders.

Warnings of doom, therefore, have again and again turned out to be false alarms.

2017 witnessed a big surge in all the major markets with the bullish momentum continuing through January 2018. Marquee investment companies on Wall Street came out with a rosy outlook for the year ahead, with a consensus view that the global economy is currently in a "sweet spot" of low interest rates, low inflation and high growth. Nonetheless, a shock occurred unexpectedly on Feb 2, prompting the Dow Jones Industrial Average to tumble 666 points, the largest point drop in a day since June 2016.

To cope with black swan events - hang in there

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