About an hour ago
Stocks tumbled, the Dow Jones Industrial Average plunged and the S&P 500 index fell dramatically — all over bad news out of China.
That was a little more than a year ago — when Apple announced that iPhone sales in China were slumping.
This year, the bad news out of China involves the coronavirus, and financial markets have, again, reacted negatively.
And, again, the bad news has prompted investors to call their financial advisers with fears that their retirement portfolios will be adversely affected, possibly even wiped out.
What’s an investor to do?
Lesson No. 1, according to local advisers: don’t panic.
“Certainly, calls from clients have increased. Certainly, clients are worried, but, at the same time, we are reaching out to them … just to reassure them how their positioning can ride this out,” said Nicholas Besh, investment market manager at PNC Financial Services Group in Pittsburgh.
“Our stance is that, while this is very serious and there’s a lot of uncertainty, … it’s not unexpected that we’re seeing this type of correction,” Besh said.
Another factor in the correction is the “tsunami of uncertainty” over the presidential election, particularly the candidacy of Sen. Bernie Sanders, he said.
Besh said investors should take the long view and not make any major changes to their portfolios, at least not right away.
If the asset allocation in a portfolio has been upset, the investor should look at achieving balance, but “I wouldn’t necessarily say you rebalance today,” he said. “We just don’t know where things are going to go.”
There’s nothing wrong with waiting to see how things unfold.
“We think this will pass,” Besh said. “Once we move past this, we think the fundamentals of the market will be intact and that we’ll have a positive year.”
Brad Roth, president of Kattan Ferretti Financial LP in Greensburg, said this particular correction is historic.
“This is the worst week (for U.S. stocks) since 2008 and the fastest stock market correction for the S&P 500 on record,” Roth said. “The S&P 500 has never gone from an all-time high to correction territory (in this amount of time).”
Nevertheless, calls to the Greensburg firm from clients have been minimal, he said.
“We tend to be a little more active with our client portfolios,” Roth said. “We spend a lot of time with our clients on the front end, helping them understand the investment process and what the money is going to be used for.”
Roth said clients investing for retirement should focus on the long term and ignore short-term fluctuations in the market.
“If you’re in retirement and you have immediate withdrawal needs, you should be investing more conservatively. Those investments have done well in high volatility periods,” he said.
Roth agreed that portfolios whose asset allocations have been thrown off by the recent upheaval should be brought back into balance at some point.
Michael Godwin, chief investment officer with Fragasso Financial Advisors in Pittsburgh, said his firm also has been reaching out clients as a way to assuage jitters.
“The impulse to sell out of declining markets and wait until the coast is clear is strong when such a frightening development occurs, but history shows that staying the course is more prudent than aggressively trading,” Godwin said.
“At some point, this will prove to be a buying opportunity, as large S&P 500 sell-offs have historically been followed by a rebound within six months if there’s no recession, which we do not expect, given the strength of the U.S. consumer,” he said.
In the history of pandemics, equity markets tend to decline sharply and then recover, he said.
All three advisers stressed that the week also held good news — bonds have had a positive return and international equities have outperformed the S&P 500, Godwin said.
“We’ve always preached the importance of diversification, and the current market performance illustrates why this strategy remains prudent,” Godwin said.
Stephen Huba is a Tribune-Review staff writer. You can contact Stephen at 724-850-1280, shuba@tribweb.com or via Twitter .
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