After a tumultuous start to 2016, which saw markets slide for much of the month of January before stabilizing in February, advisors are engaging investors in discussions encouraging a long-term outlook.
But 2016’s tensions may not be over. On Wednesday, analysts at Citigroup lowered their projections for global economic growth while raising fears of a recession, and last week Bank of America economists reported a 50-50 chance of the U.S. entering a recession.
None of that news is altogether unexpected: In January, Omar Aguilar, the chief investment officer for equities for Charles Schwab Investment Management, said that the messy markets are actually a return to normal.
“We have lived in a low-volatility environment since 2008,” Aguilar said. “We’re finally seeing what real volatility in equities is.”
John Straus, CEO of FallLine Investments, a Darien, Conn.-based financial consultant, says the market volatility startled some high-net-worth investors and advisors.
“It’s true that markets have calmed down a tad in recent weeks, and people are following suit,” Straus says. “Around two to three weeks ago, we were hearing from a lot of stressed people. They were bordering on as stressed as they were in 2009. There are still a lot of bad things going on, and I don’t think anyone should be complacent when there are 8 to 10 percent swings in the markets.”
However, Margaret Kineke, a Seattle-based financial advisor and senior vice president with D.A. Davidson, says her clients didn’t really start to worry until recently.
“When we started talking about volatility last year, everyone was relaxed,” Kineke says. “Everyone looked at their cash reserves and said ‘What should we buy?’ But a couple of weeks ago they started to get nervous and were more concerned about whether this instability was going to continue rather than looking for buying opportunities.”
Kristian Finfrock, an advisor at Retirement Income Strategies, an RIA, says that a prolonged period of volatility could lead to poor investor behavior.
“Even the folks who look at their portfolio performance and say they’re going to be OK can change their minds when volatility kicks in,” Finfrock says. “I don’t recall clients in years past being as concerned as they are today.”