Market swings mark 'crisis of confidence'
Analyst: All economic data is positive, only opinions are negative.
What the stock market gives, the stock market can take away.
That’s a lesson from the turmoil of the past week: The worst Christmas Eve stock market drop in history was followed by a record oneday surge on Wednesday of more than 1,000 points. On Thursday, the markets quickly tanked at the opening bell before returning to positive territory by day’s end
The Dow Jones Industrial Average was up 260.37 points by the end of trading Thursday, closing at 23138.82, a slight increase of 1.14 percent.
Despite the roller-coaster ride, Shon Anderson, president of Dayton’s Anderson Financial Strategies and president of the CFA (Chartered Financial Analysts) Society of Dayton, said the fundamentals remain, well, fundamental.
This year is shaping up to be the first since 2006 in which the U.S. economy grew at about three percent-plus, with earnings growth of nearly 20 percent for companies in the S&P 500 index.
“When you look at all the actual
data, the data is nothing but positive,” Anderson said. “The only things we see that are negatives are opinions, such as forecasted surveys.”
“It’s really a crisis of confidence,” he added.
For most investors, it can be counter-productive to monitor stocks hour by hour, day by day. Behavioral issues can be the demise of the small investor, Anderson said.
Data shows that the average investor who tinkers and reacts makes four percent per year less than a steady investor with a basic portfolio of 60 percent devoted to stocks, 40 percent to bonds, Anderson said.
“The reason for that is behavioral issues, such selling out at the wrong time or not investing due to downturns in asset classes,” he said.
His main point: Investors should keep financial goals in mind.
“If you’re not using your dollars in the next six to 12 months, then there’s really no reason to panic as negative portfolio years are expected and included in our projected returns.”
Doug Kinsey, a partner in Oakwood’s Artifex Financial Group — which manages about $130 million in client assets — acknowledged there has been plenty of volatility.
But the summer’s run-up in technology stocks wasn’t going to last forever, he said. And overall, he sees a lot of strength in the economy, and rising interest rates often accompany strong economies.
“You can’t ignore the good things that are happening,” Kinsey said.
So what’s worrying investors? He points to the trade dispute with China, with the associated trade restrictions and tariffs.
“I think that’s probably got people more concerned than anything,” he said. “When will this get resolved? China is a huge trading partner. It’s having some impact on some industries.”
He hopes for some kind of resolution to the disputes, hopefully in the first quarter of 2019.
For financial planners, Kinsey said their chief job is to preserve clients’ money and capital. They shouldn’t position too much of client assets in volatile arenas, such as stocks. Investors should keep a healthy portion of
For most investors, it can be counterproductive to monitor stocks hour by hour, day by day. Behavioral issues can be the demise of the small investor, Anderson said.
assets in investment havens that can safely weather temporary storms.
Bottom line, Kinsey would caution people not to make “knee-jerk changes,” unless they’re “overweight” in the wrong sectors.
Christopher Wysong, a financial advisor with Ameriprise Financial Services in Butler County’s West Chester Twp., is telling clients to hold steady and try to tune out the noise. Again, following a market too closely can be self-defeating.
“Even in good markets, markets fluctuate on a daily basis,” he said.
In a large market, even seemingly big drops need to be placed in perspective. At one point Thursday afternoon, the Dow Jones Industrial Average was down more than 440 points — but that was a drop of less than two percent of the overall market.
Said Wysong, “Percentages are more important than the point drops.”