Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) has advanced 13%, and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 15%.
But the stock market may lose its momentum in the months ahead if the Federal Reserve raises interest rates, and the downturn could be severe (perhaps even a market crash) because midterm elections tend to incite volatility
On the bright side, history provides a simple blueprint for success. In the event of a stock market crash, the smartest move investors can make is to buy the dip, particularly after the S&P 500 and Nasdaq Composite have closed in correction territory. Here are the important details.
Interest rate increases and midterm elections could cause a stock market correction Oil prices have increased substantially this year because the Iran conflict has disrupted a key supply route in the Persian Gulf. As of Aug. 7, WTI crude futures (the U.S. benchmark) have risen nearly 40% since January, and the upward pressure on energy prices has caused inflation to reaccelerate. The Personal Consumption Expenditure (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose 4.1% in May.