As the markets caught the Chinese flu on Monday morning, financial advisors were calmer than the Dalai Lama. The mood was captured in a morning alert from Naples, Fla.-based Capital Wealth Planning which said, “We’ve been down here before.”
After news from Asia and elsewhere around the world sank futures, the Dow Jones Industrial Average plunged more than 1,000 points in trading just after the opening bell, only to gradually recover most of those losses throughout the morning.
Advisors seem to have taken the news in stride, but any time the Dow is down four digits just after the opening bell, nerves are tested.
“Our analysts have been up since midnight,” says Mike Smith, president of Houston-based STA Wealth Management. “I think everyone has been white knuckled. I was looking at the futures this morning and I eventually had to turn off the TV. The big message is still ‘don’t panic.’”
Far from panicking, Andy Kapyrin, director of research at Morristown, N.J.-based RegentAtlantic, said the decline should have been expected.
“I believe that this decline is a healthy correction,” Kapyrin says. “It was easy for the market to latch onto negative news from China this year because corporate earnings growth was flat.”
At HoustonFirst Financial Group, President Christopher Hensley says investors are well insulated from downturns.
“I use actively managed rules based on investment style, and part of that system is deciding once a month if we should be invested in an asset class or not,” Hensley says. “When we have corrections, we reach out to clients to remind them that we have rules in place that put us in a more defensive position automatically.”
The Chinese economic slowdown may be one of the immediate causes of the current market drop, but the market always responds, at least temporarily, to uncertainty by re-pricing lower, says Lane M. Jones, chief investment officer for Evensky & Katz/Foldes Financial Wealth Management in Texas and Florida.
In a memo sent to clients Monday morning, Jones says the financial media is always looking for a single cause for a market decline but, in fact, declines happen frequently. Meanwhile, portfolios are designed for years, not days.