With a volatile stock market, professionals advise caution
State’s top financial officer encourages people to take the “long view” and to be patient
The job market is strong and the Capital Region’s unemployment rate is hovering near historic lows.
But the financial markets have a different story to tell, one that is raising concerns. Swings of several hundred points have become common. A 660-point drop in the widely followed Dow Jones industrial average on Thursday was followed by a gain exceeding 800 points at one point on Friday.
But the overall direction has been down, with the Dow on Friday closing 1,800 points below where it was a year earlier.
The state’s top financial officer, Comptroller Tom Dinapoli, advises patience
and caution.
“We always take the longterm view,” he said Friday. “We’re patient.”
Dinapoli oversees the state’s public pension funds, with more than $200 billion in assets and more than 1 million workers covered. In the 2018 state fiscal year ending last March 31, the fund earned 11.35 percent on investments.
“It can be a whipsaw between April 1 and March 31,” one financial analyst said. “But it all depends on where the market is on March 31.” At that point, officials determine whether contributions to the public pension funds need to be adjusted.
“We’re going to be patient for the next three months,” Dinapoli said. “I’ll be very nervous on March 30,” the day before the next fiscal year ends, if the markets are still volatile.
Swing in the markets also show up in individuals’ 401(k) and 403(b) defined contribution retirement plans. And if balances dwindle too much, that could affect consumer confidence and spending.
Fears of a recession, for example, might lead them to hold off on major purchases.
“It’s not abstract,” said Hugh Johnson, chief investment officer at Hugh Johnson Advisors and a close observer of the economy. “It may signal a problem for the U.S. economy in the months
ahead, a slowdown, or worse, a contraction.”
Economic growth has been slowing. The Empire State Manufacturing Survey, in which the New York Federal Reserve Bank seeks to quantify trends in business activity, found growth decelerating in December. Fewer manufacturing executives statewide reported conditions had improved. Worse, nearly one in five who responded to the survey said conditions had worsened.
Dinapoli cited the low unemployment rate as one sign the economy remains strong. New York’s rate in November was at 3.5 percent, the lowest for the month since figures were collected beginning in 1976. In the Capital Region, unemployment
stood at 3.1 percent in November.
And Dinapoli said that much of the market turmoil may be self-inflicted, traced to federal policy.
Apple’s first profit warning last week to investors in 16 years was blamed largely on a drop in iphone sales in China.
China’s economy has slowed at the same time the Trump administration has engaged it in an effort to lower that country’s trade barriers to U.S. goods.
“There is certainly time for some of this to sort itself out,” Dinapoli said. Apple’s China troubles are “a concern that will hopefully resonate with the Trump administration.”
Another issue is the continuing federal shutdown, now entering its third week, as President Donald Trump holds out for funding for a wall along the U.s.-mexico border.
On Friday, Trump told U.S. Sen. Charles Schumer, D-N.Y., that he was prepared to keep the federal government shut down for “months or even years,” The Washington Post and The New York Times reported.
But the markets brushed off the threat, ++focusing instead on Federal Reserve Chair Jerome Powell’s indication that future interest rate hikes might slow, depending on the economy. A strong jobs report also helped.
The Dow closed Friday at 23,433.16, up 746.94 points.