Financial advisor: 'Level of volatilty' in stocks abnormal, but 'stay the course'

Cary Ashby • Feb 7, 2018 at 4:00 AM

A local financial advisor said the “level of volatility was abnormal” when stocks went into free fall Monday, yet it’s important to expect overall changes in the stock market.

Generally, investors should expect a 5-percent dip at least three times a year and a 10-percent correction once a year, said Dustin Kuhlman, an Edward Jones financial advisor in Norwalk.

Also what’s “completely normal” is a 20-percent correction once every three years, he added.

On Monday, the Dow plunged almost 1,600 points — easily the biggest point decline in history during a trading day, according to CNN Money. Buyers charged back in and limited the damage, but at the closing bell the Dow was still down 1,175 points, by far its worst closing point decline on record. 

Markets steadied Tuesday as the Dow gained more than 560 points, closing just shy of 25,000. The Nasdaq and S&P 500 rallied, as well, each closing about 2 percent higher than Monday's close.

“There are a number of things that happened,” said Kuhlman, who cited the two most significant — the current increase in jobs (200,000 jobs gained in January) and a wage growth of about 2.9 percent. 

The wage growth is the largest increase since June 2009. Kuhlman said the two factors mean that investors are expecting inflation ahead and they are worried that the federal government is being aggressive with interest-rate hikes, which lessen the impact of inflation.

Also, he said stocks have been rising for 15 straight months, which made investors “a little uncomfortable.”

The drop Monday amounted to 4.6 percent — the biggest decline since August 2011, during the European debt crisis, according to CNN Money. But it was nowhere close to the destruction on Black Monday in 1987 or the financial crisis of 2008. Still, for investors lulled to sleep by the steady upward climb since Election Day, it was alarming.

President Donald Trump, in a White House statement, said he was focused on “our long-term economic fundamentals, which remain exceptionally strong.” The statement cited strengthening economic growth, low unemployment and increasing wages for workers.

Locally, Kuhlman said Edward Jones received calls from their clients, which is a normal situation. The financial advisor said at Edward Jones it’s crucial knowing what’s important for their clients and establish financial goals based on that.

“Talk to your financial advisor,” added Kuhlman, who said while it’s appropriate to revisit your goals, “stay the course” when the stock market is particularly volatile.

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