Advisers: Stick to plan as stocks dive
Slide continues amid trade tensions, interest rate, fears of slowdown.
U.S. stocks continued their dramatic slide Thursday as investors dumped their investments on fears of rising interest rates, trade tensions with China and fears of a global economy slowdown.
The Dow Jones Industrial Average closed at 25,052 points, down more than 1,350 points since the start of Wednesday including 545 points Thursday alone.
The S&P 500 dropped 2.1 percent to 2,728.37 and posted its sixth straight decline.
October, a month known for major market sell-offs in the past, has been a brutal month for investors so far. The S&P 500 has lost 6 percent during the month so far and is now higher by just 2 percent for 2018.
While emotions can run high when the Dow plummets, local money management firms said investors should stick with their long-term plan and wait for the stock market to stabilize.
“Turn off the news,” said David James, director of research at James Investment Research, based near Xenia.
It’s actually typically better to
buy stocks when there are periods of stress than when everything is at its best, said Ryan Johnson, director of equity research at Bucking- ham Capital Management in Centerville.
Johnson said stock investing is most appropriate if that portion of a person’s money will not be needed in the next five or more years so it has time to recover if there is a downturn.
“Stick with your plan, do not make emotional decisions, and know that pullbacks and corrections are part of a normal, healthy operating market,” he said.
James said rising interest rates are pushing up 30 year mortgage rates close to 5 percent, which is making it harder for some people to buy a house, and inter- est rates are also affecting car sales by making it harder for dealers to offer a no-in- terest loan.
Johnson said interest rates have been moving up, but the Federal Reserve has been increasing short-term rates for the right reasons: we have a strong economy with low unemployment and modest inflation.
The series of tariffs and retaliatory tariffs between the U.S. and China have also had a negative impact on stocks, said James. He said it isa rare day anybody “wins” a trade war.
“The longer this goes on with China and the like, the more losers there will be including U.S. consumers,” James said.
Johnson said corporate earnings are expected to grow more than 17 percent in 2018, helped by tax cuts, and more than 10 percent in 2019, which should help support stock prices.
“We are about 5 percent off of all-time highs and the stock market is still up over 5 percent this year,” he said.