By Scott Whipple
A local investor, who asked not to be identified, talking about the stock market, said it’s been a long bull market, almost six years. “For that reason, a lot of people are getting worried. It all has to end sometime.”
On Thursday, the Dow Jones average seemed to reflect this anxiety by plunging 265 points while shares in Apple also fell. Some investors wondered if it was time to take their money off the table.
Though the stock market rallied on Friday, Brendan Conry, founder and principal of Conry Asset Management, LLC, in Kensington, is advising his clients to reduce equity exposure if they haven’t already done so.
“We haven’t had a 10 percent correction in nearly three years,” Conry said. “The latest economic reports have been a bit soft especially outside the U.S. So analysts are getting a bit more cautious about GDP [Gross Domestic Product] growth for the next 12 months as well as the impact on earnings.”
Most financial analysts blame the stock market slide on increasing concerns about the global economy. David Carrig in USA Today also noted “a growing backlash against problems consumers are reporting with Apple’s latest software updates and its new product launches, the iPhone 6 and iPhone 6 Plus.”
Financial advisor Michael Chadwick ofwww.fiscalwisdom.com with offices in Unionville, Torrington and Manlius, N.Y., says investors should either “take their money off the table, put stop losses on their positions or raise their stop losses to be pretty tight. [A stop-loss, an order placed with a broker to sell a security when it reaches a certain price, is designed to limit an investor’s loss on a security position.] Thursday’s action may be a shot across the bow and people should be paying attention.”
“Any investor who tries to get in and out of the market gets creamed,” warned Nicholas Perna, Webster Bank’s economic adviser. “They usually sell at the wrong time and buy at the wrong time.”
Perna recalled Warren Buffett’s maxim for building wealth in stocks; i.e., be fearful when others are greedy and greedy when others are fearful.
Perna also recalled that in October 2008 (October has been a traditionally troublesome month for investors, especially in 1929, 1987 and 2008) many stockholders held on too long. However, if a rising prime rate is fueling this fear, Perna says rates are unlikely to increase until next summer; even then, the rate hike shouldn’t be much higher than the current 3.25 percent.
Pete Gioia, economist for the Connecticut Business & Industry Association, played down negative reactions to Thursday’s one-day Dow Jones tumble.
“Investors shouldn’t panic because we had a bad day in the stock market,” Gioia said. “Markets sometimes get jittery because some people think the economy is doing too well or the Federal Reserve is going to raise rates. There’s going to be volatility [in the stock market], but that doesn’t bother me. What I’m focusing on is the fundamentals [of the economy]. They look very good for the U.S. overall; less good for Connecticut.”
Still, Conry cautions investors to be vigilant.
“There’s no way to tell when a bear market starts or stops until it’s too late to do anything about it,” he said.
Scott Whipple can be reached at (860) 225-4601, ext. 319 or firstname.lastname@example.org