Dow drops: Are you ready for the stock market roller coaster?

Stocks markets took a break from their meteoric rise of the last several months. The Dow dropped 2.5%, and the S&P 500 fell 2.1% on Friday, capping their biggest weekly decline in more than two years. Although frustrating to some, today’s losses are likely a good thing. The market was in need of a pullback. Week after week of positive results, while comforting to hear, is not how markets normally behave. Overheating was a concern on the minds of many market participants. A down week helps to tamp down the flames. Friday’s pullback was not really surprising given the extreme upsurge we’ve seen in equity prices. Moves of 2-3% are not unusual in hot markets, especially a late-stage bull market like the one we’re in. Investors need to be prepared for volatility in 2018. Setting the scene Today’s selloff followed news that the economy had added 200,000 jobs in January and wages grew at the fastest pace in eight years. Investors might be worried that wage growth could impact corporate profits, one of many examples in which the interests of asset owners and labor are not perfectly aligned. But both groups should be concerned about inflation, which is rising now