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Pace Professor Cites Normal Market Changes For Stock Market Drop

PLEASANTVILLE, N.Y. -- Last Friday the Dow Jones Industrial Average fell 531 points, its worst day in four years. On Monday, the market continued to drop, finish 600 points below the opening bell tally. 

Despite market turmoil, Pace professor Padma Kadiyala  says it is all part of natural market progression.

Despite market turmoil, Pace professor Padma Kadiyala says it is all part of natural market progression.

Photo Credit: File photo

However, Pace University professor of finance Dr. Padma Kadiyala assures these record-setting fluctuations are nothing more than natural market progression. "Investors are concerned the Chinese economy is slowing down and will ultimately have an effect on our markets" she says. "We live in a global world, so what happens around the world affects us all." 

Dropping oil prices have also lead speculators to worry that a weakening demand for crude is due stalled growth and a slowdown manufacturing. The Federal Reserve's September interest rate announcement has also promoted caution amongst investors.

However, the two-day drop off is a normal market fluctuation and shouldn't cause panic amongst investors, Kadiyala explains. "Long term investors should not be concerned; markets have been trending upwards almost too aggressively and this is a natural correction. One should expect this type of volatility, as the stock market is subject to highs and lows. From 2010 to date, investments have grown 12% annually, a much better return than simply keeping money in a bank."

Kadiyala also cites technology as being partially responsible for similar drops. Automated traders are programmed to sell shares if stock prices dip below a certain level, sometimes creating a computer-driven mass sell. Only when an actual broker steps in and begins buying shares can the trend be reversed. In the case of the most recent dive, this was a contributing factor Kadiyala says.

It's not all bad news, however. "Corrections like this get a lot of attention." says Kadiyala "That makes it a good time to look at portfolios and ensure you are not overexposed to one section of the market. Especially if you are close to retirement, investors should have funds spread as evenly as possible."

This article is part of a paid Content Partnership with the advertiser, Pace University. Daily Voice has no involvement in the writing of the article and the statements and opinions contained in it are solely those of the advertiser.

To learn more about Content Partnerships, click here.

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