Pleasing to see the NZ stockmarket open yesterday with minimum fuss. Yes, it dropped, but "bloodbath" it wasn't.

Corrections are what inflated markets do. A correction is generally considered to be a ten percent or more decline from the highest price group of stocks.

Investors will tell you the lesson is to stay the course, keep your eye on the horizon look long term. Hard to do when panic sets in and words like "plunge" and "bloodbath" get thrown around.

The hooked investors, those with balls of steel, of course, seize on times of volatility as yet another opportunity to make money: what can they get going cheap? What can they make money on here?

Advertisement

Generally, though, the sense is to ride it out. But sense is far from what happens in the reportage of stockmarket turmoil.

Frenzied speculation and hysteria, yes. Sense and reason, no.

I note an investment advisor yesterday said what we should be looking at is the percentage not the numbers. The Dow's 1,100 point drop sounded big, but is only relevant as a percentage of what the overall number is. That, in fact, amounted to a decline of less than 5 percent.

In terms of history, the fall was not even in the top 100 percentage-based falls of all time.

In the grand scheme of things, this is not a bear market, and there's no recession looming.

Look at where we've come from. A week ago, the US market had run up 12 percent in three months, about 25 per cent in 12 months so all this wobble does is put us back to where we were a couple of months back.

There is still time, of course. Markets move and there's more to come in terms of US tax cuts feeding through but, for now, there's no need to panic.

And actually, New Zealand is probably more protected than most because the interest rate rises that led to the stockmarket plunges are not a factor here.

It's also salient to remember that the market's view of valuation changes. That's what markets do. However, good companies with good cashflow are still good investments.

The experts will tell you our economy and market is in good health, full of low risk, stable, predictable, solid companies so we more than anyone, should be robust enough to trade our way through it. More reason to turn off the alarm bells. Prudent to note that this was a Wall Street issue, not a main street issue.

So when we're calling it a bloodbath, when we're throwing hyperbole and hysteria into the mix maybe we need to just take a breath, stop spooking, and start dealing with the facts.

The Dow fell, stocks go up and down; that's what markets do. Those movements are actually healthy. Stocks get ahead of themselves and need to pull back. It's the texture of the market. The push and pull. So in light of what happened yesterday what do we need to do?

Well, for a start we need to think long and hard about whether we attach the word "bloodbath" to the story. So while the market movement may well experience a few more trembles before it settles again, what's the very best thing we can do right now? Keep calm and carry on.