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LA-based financial planner gives 3 reasons for recent stock market drop

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Stocks have dropped 5.8 percent since January 1 and three main factors have affected the price says financial planner Rob Menz.

A continued "taper" by the Federal Reserve, China's slowing economy, and weakness in emerging markets are among the reasons for the dip.

"Two years ago, the Fed purchased $85B worth of US Treasuries and Mortgage Backed Securities and this helped keep interest rates artificially low," says Rob. "They're reducing or tapering off the amount of money that they're artificially putting into the economy. Investors, meanwhile, are favoring U.S. Treasury notes."

China's economy continues slowing with manufacturing output hitting six-month lows. "The Chinese may not be buying as many raw goods from emerging markets like oil, aluminum, cotton, and copper. These purchases support those economies and there aren't other major buyers to step forward."

Rob says the emerging market economies borrow money and reinvest it to promote growth. "If global interest rates begin to rise then it costs more for those countries to borrow and pay back the investment funds."

Recent key figures in the U.S. have been sobering as well. "U.S. manufacturing has been slow with lower durable goods orders. Plus, numbers for employment and retail are low and the tough winter weather across much of the country has hurt vehicle sales."

U.S. investors shouldn't worry, says Rob. "Stick with a long-term investment strategy that's not knocked off course by a 5 percent shift in the markets. Consider reducing exposure to emerging markets for the short-term. Reinvesting dividends for portfolios heavy in stocks makes it possible to purchase more shares at lower prices than was possible at the end of 2013."

Rob Menz says many analysts were looking for a correction in U.S. stocks after a steady rise in 2013. "That would be a 10 percent drop. We're halfway there and while many people may seek safety don't be afraid to maintain a balanced portfolio and look for opportunities."

Click here for Rob's website and additional information.

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