Take a deep breath and don’t overreact, investors.
Yes, the financial markets are acting like roller coasters right now. But this volatility is normal and is connected to economic woes in China. Stay put with your investments. Though if you decide to make changes, consult a professional. There may actually be good opportunities now to buy low.
That’s the advice from Atlanta area investment experts and economists reacting to Wall Street’s bipolar behavior. Just minutes after the market opened Monday, the Dow Jones industrial average plunged by more 1,000 points. It climbed back to close down 588 points — a 3.5 percent loss — as bargain hunters swooped in. The S&P 500 and Nasdaq composite also skidded, each by nearly 4 percent.
“I’ve been in this business 44 years now and I’ve never seen anything quite like that… seeing such a level of panicked selling,” said Stephen Sloan, chairman of Arcus Capital Partners, an Atlanta investment management firm.
Saying he remains optimistic about the U.S. economy, Sloan called the steep shifts in the markets an overreaction to China’s economic woes. He added his clients have remained calm and said this “shake-out” can create opportunities.
“The market can’t just go up,” Sloan said. “A correction like this provides an opportunity to put cash to work and buy stocks at a better price.”
James Hansberger, who has also been in the investment industry for more than 40 years, is similarly urging caution. He is preparing to hold a conference call about the stock market turmoil with his clients Tuesday.
“The American stock market is a little bit in a midlife crisis,” said Hansberger of Atlanta-based Hansberger and Merlin at Morgan Stanley. “The recovery began in 2009 and the long-term cycle remains up, but it doesn’t mean that as you go higher that there aren’t some tremendous headaches.”
Hansberger pointed to a silver lining for investors.
“Instead of thinking of a wildly gyrating stock market, actually think of the business itself and the characteristics of great businesses,” Hansberger said. “And there are many great businesses out there — with very little debt, with excellent returns on capital, with spectacular management — that are now selling at prices significantly lower than they were only a week or two ago.”
Michael Hines, president and founder of Consolidated Planning Corp., an Atlanta financial planning firm, said the market changes appear to reflect a “normal bottoming process.”
“Eventually, the market needs to find the space where it goes, ‘OK, stocks are just getting too cheap,’ and all the sellers have just exhausted themselves,” he said.
Now is the time to be “more aggressive” in the market, Hines said before adding that investors should seek professional guidance.
“Get some advice from somebody who knows what they are doing,” he said. “I wouldn’t go decide to have major surgery without probably getting a second opinion. But at least I would get an opinion.”
Investors are spooked about China’s economic health, said Rajeev Dhawan, director of the Georgia State University Economic Forecasting Center. China, the world’s second-largest economy, devalued its currency this month. That “was a bit of a shock to the system,” Dhawan said.
“To me, the markets move in the right directions, but they have a tendency to overreact,” he said. “Finally, the markets are waking up to the reality that China is not as strong as they were believing.”
Dhawan predicted the market volatility will continue until people fully digest the news about China’s struggles.
Roger Tutterow, who teaches economics at Kennesaw State University, said concerns about China’s economy have “taken the wind out of global markets.”
“The incredible opportunities in China was such a compelling story for so long that when that picture changed I think it rattled global markets,” he said. “It’s not surprising that when you see China and Europe trading down as much as they did overnight that we followed them down.”
Tutterow predicted the markets will recover this year, though they could still suffer more volatility in the near term.
“Most of the economic data suggests that the economy is still growing,” he said. “We are continuing to add jobs at a pretty good clip.”