No surprise, stock market woes have dragged down share prices everywhere, Friday’s upward bounce notwithstanding.
Northeast Ohio’s publicly traded companies are no exception. For instance, since Jan. 1:
Goodyear? Deflated.
FirstMerit? Cashed out.
TimkenSteel? Melted down.
And so it has gone with market indexes falling one day and then rebounding at least a bit another. There’s a joke about the new “Down” Jones Industrial Average. Yes, it’s been the worst early January start in market history even as major indices finished out the week on high notes.
Seesaw stocks, many of which are off 10 percent from last year’s highs — the definition of a correction — have made individual investors uneasy at times as retirement accounts and other personal investments have taken hits. Among the reasons touted for the sell-off are a wobbly China economy, doubts about consumer spending and plunging oil and natural gas prices that have depressed energy stocks (while also putting more money in consumer pockets).
Chad Immel, a Fairlawn-based broker and financial adviser with national investment firm Edward Jones who has 200-plus clients, says it appears to him that investors are nervous. It might be best for people to simply turn off or tune out much of the financial news, he said.
“Most clients are taking this in stride,” Immel said. “I’m not getting a lot of panicky calls. You really don’t know where you are with risk tolerance until you go through a few bear markets.”
Despite the economic and financial worries, a U.S. recession appears unlikely in the near future, observers said. As a result, lower stock prices may represent a buying opportunity, Immel and others said.
Staying the course
Among Immel’s clients is Eric Jones of Jones Group Interiors on South Broadway in Akron. Immel advises Jones with his personal investments and also is the adviser for the retirement plan for the high-end interior design firm’s 20 employees.
“Although I follow the market every day, it’s really more of a curiosity,” Jones said. He said he knows that Immel and other investment advisers do not have crystal balls to foretell the future.
“I look at Chad as ultimately a coach. And I believe in my coach,” Jones said. “It’s called staying the course. ... We’ve all been through the up and down, the big crash, so ultimately ... it’s not gambling for me, it’s a slow, steady ‘How do we keep it going?’ ”
Jones said he has been coached to hold a balanced investment portfolio.
“We know what that risk and reward is,” he said. “The risk reward value to me is slow and steady.
Jones pays attention to local company stocks, in large part because many of the local companies are his customers. When the local economy and local companies do well, Jones Group does well, Jones said, adding that business is good. “We’ve always been focused on downtown,” Jones said.
Investors may be more comfortable owning local companies because of familiarity but that is not necessarily a good reason to own shares, Immel said. “It has to make sense first,” he said.
This is a good time for investors to look at their investments and make needed adjustments to stay diversified and bring them into balance while not making knee-jerk reactions, he said.
“This means they are generally always trimming back what’s performed well and adding to what’s been beat up,” Immel said. “It doesn’t feel good but it’s the right thing to do.”
Current stock prices may provide opportunities related to saving on taxes, making conversions to Roth IRAs and other changes, Immel said.
Even with big gains Friday among U.S. stocks, the Dow was still down 7.6 percent since Jan. 1, with the broader S&P 500 Index down 6.7 percent and the Nasdaq, with a high percentage of technology stocks, down 8.3 percent.
Economist Ken Mayland of ClearView Economics in Pepper Pike said the stock market’s actions have him scratching his head at times.
Mayland expects the U.S. economy will grow 2.5 percent this year – slow by historical standards, but in line with recent years.
“We are underperforming,” he said. “I’m still saying the economy continues to expand this year. My indicators have not turned negative.”
Worries all around
The phrase “panic selling” is an apt description of what has been happening with the stock market of late, Mayland said. People are worrying about China, about energy prices and retail sales yet are ignoring or dismissing positive signs such as the latest strong U.S. jobs report, he said.
The market also may be reacting to the Federal Reserve ending the quantitative easing it enacted to prop up the economy, Mayland said.
“The Fed put a lot of liquidity out there,” he said.
The Fed purposely wanted people to put money in riskier, higher yield investments such as stocks, he said.
It’s possible that an unintended consequence of the Fed’s action is that investors now are paying a price for taking on that risk, he said.
“Maybe companies took on too much leverage,” Mayland said. “Maybe they overexpanded. Maybe those debt chickens have come home to roost. ... Maybe the exit strategy is not so pleasant. ”
Mayland said investors are getting whipsawed. Much of the blame for market gyrations can be placed on computer-trading algorithms and high-frequency trading, he said. Large stock movements for apparently no reason can make people feel like the game is rigged, he said.
“I feel for the small investor,” Mayland said.
Feeling a little low
Another Immel client, Clay Rhinehart, worked 40 years for B.F. Goodrich. He and his wife spent 11 of those years overseas in the Netherlands, Iran and Australia before returning permanently to Akron. Rhinehart has been retired for 25 years now and, at age 85, has seen a lot of stock market gyrations in his lifetime.
“I think everybody is feeling a little low right now,” Rhinehart said, saying it has been a “nasty time the last few months.”
Rhinehart said he stays away from owning individual stocks and bonds and instead owns more broadly diversified investments while paying attention to Immel’s advice.
“We do try to stay focused and stay as balanced as we can. That seems to be working pretty well for us,” he said. “We’re not selling anything off. But if we see opportunities to buy, we’re doing that.”
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ. His stories can be found at www.ohio.com/writers/jim-mackinnon.