Yes, the stock market caught a southbound train Friday. Don’t panic.
That’s the advice from a pair of financial advisers in Tacoma, and that’s the word from a nationally recognized economic strategist.
The stock market capped the first two weeks of 2016 with a steep slide Friday that sent the Dow Jones industrial average down nearly 400 points.
All three major stock indexes — the Dow, the Nasdaq composite index and the Standard & Poor’s 500 — are now in what’s known as a correction, or a drop of 10 percent or more from their recent peaks.
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The market has been on a stomach-churning ride since the start of the year, wrenched up — but mostly down — because of alarm over a slowdown in China and the plunging price of oil to its lowest level in 12 years. Investors are already seeing damage to U.S. corporate profits, particularly at energy companies.
Given lower prices, however, this might be a time to buy back in rather than take the recent advice of the Royal Bank of Scotland to liquidate your portfolio ahead of a “cataclysmic year” for investors.
“I do have some clients who are getting worried. People are getting a little concerned about the conditions in the New Year,” said Ali Criss, managing partner at Tacoma’s Financial Insights, on Friday.
“I do have some people who are interested in going to cash, but I’m trying to discourage that behavior,” she said.
She reasons that we are trailing a six-year bull market, and interest rates have been held artificially low for some time.
“I think volatility is expected, almost welcomed,” she said. “If we don’t have any downside in the market, we won’t have any buying opportunities. We can’t go up forever.”
This may be the time to buy, she said. “I can’t say that today is the best opportunity, but as the market goes down, we go in steadily.”
Investors got some discouraging economic news Friday: The Federal Reserve said U.S. industrial production, which includes manufacturing, mining and utilities, dropped in December for the third month in a row. And another government report indicated U.S. retail sales dipped last month.
Gary Brooks, president of the firm Brooks, Hughes & Jones in Tacoma as well as a contributing writer of a monthly financial column for The News Tribune, said Friday, “We haven’t had a lot of incoming panic. The market landscape is shifting and changing all the time.”
He recommends a longer perspective.
“The seeds of the next recovery are sewn by today’s declines,” he said. “If you bought something six months ago, and now it’s down 15 percent, it should be presenting better value today.”
If clients have followed previous advice to select “target weights” in various investments, Brooks asks, “if that’s what we’ve defined as the best fit for your goals, has that really changed?”
He does not side with those who go with “the idea that you can sell now to protect against more loss tomorrow or the next quarter.”
Those who panic with the headlines and who haven’t set or followed a reasonable asset mix “are going to lose track of the ongoing investment strategy that makes sense.”
It’s good to pay attention to your portfolio, but “the people who check their balances the least do the best,” Brooks said. “No one’s going to pick the exact bottom, but buying today was better than buying two weeks ago. It’s not like we came to the end of the year and everything has gone off the cliff. All of those things have been building for quite a while.”
Bruce McCain, chief investment strategist for Cleveland-based KeyBank, said Friday that current data suggest “we are still well within the bounds” of a solid economy.
“It’s not that things are going well, you’re just not seeing the deterioration you would see in a recession. Even on the trade side it looks like things are holding together well. It doesn’t look like the situation that precedes a recession. If in fact this is a correction, you’ve already seen the bulk of the damage.”
Like advisers here, McCain said, “If you have positions, hold them. At the same time, we think that it’s going to be a good buying opportunity. We’re not forecasting great growth — maybe single digits would be a sound expectation.”
And it’s not like his sense of humor has been a victim of a market correction.
“I should add that I haven’t been wrong since 11 o’clock this morning,” he said Friday afternoon.
The Associated Press contributed to this report.
C.R. Roberts: 253-597-8535