Aug 24, 2015 3 min read

Last week, financial markets in the United States saw the biggest losses in four years. Then, Monday morning, stocks plummeted as China’s declining economy spread panic across the globe.

But what does a downturn in the world’s second-largest economy and the subsequent stock market plunge mean for the average investor?

“Don’t panic,” said Sara Botkin, financial adviser and president of Botkin Family Wealth Management in Peters Township.

“This is not an unusual occurrence. Correction is normal.”

A stock market correction, Botkin explained, occurs when there is a 10-percent drop from a recent peak. As of Monday, the Dow Jones, S&P 500 and Nasdaq, widely considered the most popular market indexes that track large U.S. companies, are all in correction mode.

While “correction” is an unsettling term for investors to hear, Botkin said this decline is not a surprise.

“The last time the market corrected itself was in fall of 2011. The market corrects itself about every year-and-a-half,” she said. “When you look at those statistics, this downturn is expected.”

In addition to markets overseas foundering, uncertainty about the Federal Reserve’s upcoming action on interest rates in September has led to the stock market decline, said Botkin and Donald Detts Jr., Washington resident and vice president of investments for Wells Fargo Advisors in Green Tree.

“We have expected volatility to pick up as we move closer to a period of Federal Reserve tightening. Even so, the recent volatility has not been particularly remarkable,” Detts said in an email. “Investors are typically nervous going into the initial phase of Fed rate hikes.”

While short-term traders, or those who sell their stocks within days or weeks of buying, should be concerned by the downturn, those who invest long-term shouldn’t panic.

Botkin said investors should assess their stocks for quality and diversity.

“People want assurance. We’re telling them what we’ve always told them,” Botkin said.

Detts recommended investors consider this time as an opportunity “to accumulate quality shares whose underlying companies should benefit from continuing cyclical domestic growth during the back portion of this economic recovery.”

Detts said to consider that while stocks are down, “the services segment of the economy continues to show strength, given that consumers have cleaned up their balance sheets, job conditions continue to improve, and home and stock prices have offered some upside to their net worth in recent years,” he said.

Detts also said the current low interest rates and oil and gasoline prices should offer more spending power for consumers.