Local investment advisers say their clients were not panicking amid Monday’s stock market gyrations, and may have even seen a chance to pick up bargains.
The advisers said they were counseling their clients to ride it out, viewing it as more of a market correction than the sign of a downturn in the U.S. economy.
Despite the market falling into correction territory – down 10 percent from its recent high – investment professionals interviewed said they had fielded few calls from worried clients. The 1,000-point drop in the Dow just after the market opened may have had hearts beating faster, but the market recovered somewhat and finished down 588 points, or 3.6 percent.
“Generally speaking, my clients are calm and more concerned about whether this is a buying opportunity rather than the end of the world,” said Jeremy Beck, president of Anvil Investment Partners.
Investors have enjoyed a long streak of success, said Edwin M. Johnston III, managing partner of Sandhill. “They’ve made a lot of money in the last six years.”
Investment professionals said they were advising their clients to ride out the sell-off and keep a long-term perspective. Some of them noted that the U.S. economy’s fundamentals, including areas like housing and employment, remained strong, lessening their fears about a weakening domestic economy.
“This is really a situation that’s panic selling rather than based in economic fundamentals,” said Gerald Cole, co-founder of Arbor Capital Management. If the fundamentals were bad, “we’d be decidedly more worried, but we really think that the trigger here is a massive sell-off in China and the fundamental problems in Asian markets is really at the root of it.”
Cynthia E. Vance, a certified financial planner at Jensen, Marks, Langer and Vance, said that even before the recent wave of bad news on Wall Street, she has been talking to clients about the possibility of a drop. “I think one of the jobs we have as financial advisers is to educate our clients on market ups and downs, so maybe it’s not such a scary thing when it happens.”
Bruce Kaz, president of Courier Capital Corp., said most of his clients “look at themselves as long-term investors. So far, this looks like an interim event, rather than a long-term event.”
Anthony Ogorek, president of Ogorek Wealth Management, said investors should know both their risk capacity – meaning the resources they can afford to invest – and their risk tolerance, meaning their stomach for bad market news.
“Certain people may have a very high risk capacity, but a very low risk tolerance,” Ogorek said. “Our concern is that we don’t want someone banging the table saying, ‘You have to get me out,’ because that’s when they tend to get hurt, because the market could come back fairly quickly, and if they’re not in, that’s a loss that we can’t replace.”
Situations like these, he said, can be a good time for individuals to review exactly where they have their money invested, and in what percentages.
Beck said he also advised his clients to ride out the market’s woes in 2011, and he sees a seasonal pattern to these sell-offs.
“In August, a lot of people who run a lot of money go to the Hamptons or are every place else but at their desks,” he said. “The markets tend to be thinly traded and it tends to be junior staffers running things, which just magnifies movements because there is not the experience to know to ride it out.”
David Hartzell Jr., president of Cornell Capital Management, said many of his clients have gone through previous stock market declines triggered by foreign events. “They know, having been through this before, that when the trouble is overseas, the market, although it blows off, it tends to come back fairly quickly,” he said. “When you run into trouble is when the problem is in the United States, like tech meltdown or the financial meltdown. When the problem is in the United States, it becomes much bigger and lasts much longer.”
Cam Albright, head of investment strategy for Wilmington Trust in Delaware, which was acquired by Buffalo-based M&T in 2011, said he believes an interest rate hike by the Federal Reserve that was anticipated for September will probably be pushed back to December at the earliest. “I think that the Fed would be hard pressed under the circumstances to start raising rates, given the volatility that they’ve been facing in the markets right now,” he said.
As for whether this is an ideal time for investors to jump into the market and buy, investment advisers had mixed views. But they agree that U.S. investors have ample money “on the sidelines” if they decide to make such a move.
“I think it will present itself as an opportunity to buy,” Vance said. “I don’t know that the market has quite bottomed out yet.”
Vance said investors near retirement age have ideally allocated their assets so they aren’t faced with the challenge of selling stocks at a loss at times like these. “Somebody younger, they have a long time to go, they can take these market declines as opportunities to hopefully buy into something at a better price,” she said.
Hartzell said his clients will probably wait on jumping in to buy. “They’re waiting and watching. They’ll have to see what happens over the next week or two.”
Kaz added: “I think we’re closer to the bottom of this than the beginning of a long-term decline. It’s probably a buying opportunity.”
By Matt Glynn | News Business Reporter