Bernanke’s announcement on Thursday essentially told the market it was time to take off the government training wheels. As a result of rising employment and a recovering economy, the Federal Reserve no longer sees a need to buoy the market’s performance.
While that news might cause a few early hiccups for shares, it largely doesn’t change how a company will function. In the long run, the only thing that will affect these companies are their businesses. Not the discontinuation of stimulus funding.
If you’re a Hewlett-Packard Company (NYSE:HPQ) investor, your primary concern should be the company’s ability to penetrate the burgeoning big data market, projected to double in value by 2016. HP faces a long road to becoming a big-time player in a space dominated by IBM, and may soon find that its costly focus on infrastructure won’t pay off. Regardless, Hewlett-Packard Company (NYSE:HPQ) won’t look like a “sell” unless it fails to wrestle away market share from IBM in the next three years.
For Yahoo! Inc. (NASDAQ:YHOO), all it takes is a quick peek at company financials to realize that the market overreaction has nothing to do with the company’s future prospects. In the past year, Yahoo! Inc. (NASDAQ:YHOO) shares have outpaced the Nasdaq by more than 45% despite marginal revenue increases in 2012. Plus, with nearly 30%-per-year growth projected for the next five years, it doesn’t look like the company will get derailed by the Fed.
In such a fragile market environment, it’s easy for investors to get caught up thinking about the stock instead of the company. Unfortunately, that’s how market zombies are born.
All it takes is a whiff of bad news and a handful of doomsday investors to start cashing out. Then, it’s never long before the lemmings start lining up to join the mindless mob. Forgetting, of course, that the stock market has weathered darker days en route to 11% average returns per year, since the 1930s.
The Foolish takeaway
The stock market in 2013 has spoiled us. By enjoying the fruits of a bull market, many of us have forgotten the bitter taste of loss. However, investors who will succeed in whatever bull or bear markets that follow will be the ones who don’t abandon reason, and put their money behind solid, reliable companies for the long run.
Don’t join the zombies at the first sign of trouble. Keep calm, and Fool on.
The article How to Survive the “Zombie” Stock Market originally appeared on Fool.com and is written by Ryan Katon.
Ryan Katon has no position in any stocks mentioned. The Motley Fool recommends AMC Networks.
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