It has been a rough week for Wall Street and investors–and it may continue–but advisors say they still are optimistic 2018 will be a positive for the market.
“The news is not that the market has fallen the way it has, but that it took so long for this to happen,” said Ric Edelman, founder of Edelman Financial Services and a prominent lecturer and author. “We have been warning that this was long overdue, so we just sort of shrugged our shoulders” when it happened.
“Investors were falling into a lull from low volatility and high returns,” he said. “Our clients have been calling to ask if this is a buying opportunity, and it is.”
A few bumps, even big ones like the market has seen this week, should not upset well-positioned investors. Instead, “the thing that freaks investors out is the black swan: the event that surprises them, like a natural disaster or a terrorist attack. Anything that suggests instability is scary," Edelman said.
The important measure is not the number of points the market dropped but the percentage, Edelman said after the drops of the first weekend in February and the beginning of the week. At that point, it had been an 8.5 percent correction rather than the more traditional 10 percent, although the sell-off continued and technically became a correction on Thursday.
It is heartening at this point that the economy is still strong, said Andy Hart, president and chief advisor at Delegate Advisors in Chapel Hill, N.C., and San Francisco. “An 8 percent pullback puts us back where we were in December. Our role as advisors in this type of market is to educate clients to the fact that volatility should be expected. We have dialed back our clients’ risk over the last couple of years.
“Globally, everything seems to be OK,” Hart added. “There is no catalyst to make us think the global economy is going to shatter.”
Some fear of inflation is fueling the market sell-off, according to advisors. Increases in wages and the recently enacted tax cuts, combined with the just-announced government spending increases and an infrastructure package that is soon to be unveiled, will boost the economy further and may actually cause more bumps in the market, the advisors warned.
Tammy Surratt, founder and CEO of Legacy Family Office in Naples, Fla., noted that the current environment “is a little scary and tumultuous, but we are not surprised. The only surprise is that it did not happen sooner. A correction usually happens every couple of years. We believe this is a garden variety pullback and that there is still a lot of strength in the economy.”
Despite the reassurances, Scott Tucker, president of Scott Tucker Solutions in Chicago, said, “If a person is not working with an advisor, this is a good time to start.”