As concern over economic pain from the coronavirus outbreak continues to roil international stock markets, Roy Savoian is concerned. That in itself is concerning.
Savoian is retired dean of the College of Business at Central Washington University and emeritus professor of economics. At the same time, he has a keen personal interest. He’s been keeping a close eye on his 401k; he’s retired, after all. And while he maintains a long-term perspective for his investments, Savoian’s long term is not the same for people who are still working.
He’s in good company as investors and their stocks emerge from the wreckage of U.S. markets’ worst weekly finish since the 2008 financial crisis. The Dow Jones Industrial Average fell 3,583 points this week, or 12.4%. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16%.
The market’s losses moderated Friday after the Federal Reserve released a statement saying it stood ready to help the economy if needed. The Dow swung back from an early slide of more than 1,000 points to close around 350 points lower. The S&P 500 fell 0.8% and is now down 13% since hitting a record high just 10 days ago. The Nasdaq reversed an early decline to finish almost flat.
“You’ve got a lot of dynamics operating and there’s this great uncertainty in terms of coronavirus,” Savoian said. “I don’t see many industries that are now immune. Even utilities, which have been fairly strong … they’re ending up showing some declines, which we didn’t really expect.
“A 10% reduction in the value of the stock market in such a short period of time, that’s significant.”
As uncertainty turns into fear with the spread of the virus, Savoian expects more wild times for investors. Global financial markets have been rattled by an outbreak that has been shutting down industrial centers, emptying shops and severely crimping travel all over the world.
“It may be a few months before we see a turnaround. There is a cause for concern. How much do we worry about it?” Savoian said. “I am concerned. And I’m getting pretty damn close to being worried that we’re going to have a recession, and that’s going to have an effect on our economy.”
A big concern investors have is that the stock market rout could have a psychological effect on consumers, making them reluctant to spend money and go to crowded places like stores, restaurants and movie theaters.
At the same time, experts have said markets were due for a correction, or a fall of 10% or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.
“We’ve had an expanding stock market for about 11 years. If you go back and look at the financial crisis in 2008 and 2009, when the economy tanked, when we nearly went into a financial free-fall, President Obama … brought together some experts, experts in financial matters,” which began to put us on the right path to recovery,” Savoian said. “But many financial advisers talked about the market needing to correct itself.”
Many are looking to government leaders for their efforts. Traders have been growing more certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon. Investors now widely expect the Fed to cut interest rates by a half-point at its meeting that winds up March 18.
Bond prices have soared as investors sought safety and became more pessimistic about the economy’s prospects. That pushed yields to more record lows. The yield on the 10-year Treasury note fell sharply, to 1.14% from 1.30% late Thursday. That’s a record low, according to TradeWeb. That yield is a benchmark for home mortgages and many other kinds of loans.
“All this says to us is that there are still a lot of worries in the market,” said Gene Goldman, chief investment officer at Cetera Financial Group. “We need the Fed to come out and say basically guys, we got your back.”
On a more personal level, Savoian hasn’t made any adjustments to his investments, yet. But many investment advisers saw a clear uptick in phone calls from, and to, clients this week.
Count Kathy Miller Parrish, managing partner and senior financial adviser for Ascend Financial Group in Yakima, among them. Most calls weren’t from panicked investors, though. Her clients, like Parrish, are long-term in nature. She knows which ones will be nervous and has been reaching out to them.
“The calls I’ve received are people wanting to know what they should be buying,” she said, because they see an opportunity in the massive sell-offs, she said. “I did have a couple of clients called who were concerned (but) I had more calls asking what they should be buying.”
“You have the Nasdaq today (closing) up. What it says to me (is) people are nibbling on stocks, which tells me barring any extreme news that comes out this weekend, we’re coming back at the end of the day,” she said.
Parrish has been in the financial business for about 35 years, starting on the regulatory side as a securities examiner for several years before moving into the private side. She knows that nothing goes up without some type of correction at some point.
“We’ve had an incredible market for quite some time and I think we were due for a little bit of a pullback,” she said. “It helps to have some perspective.”
If investors are uncomfortable, they perhaps are not allocated correctly, Parrish said. “That’s key to being comfortable with your investments. If you’re very very anxious this week, perhaps you need to look at your stock and bond allocations.”
It might be time to meet with your financial adviser. Parrish likes helping people and has definitely felt the need this week with all the dramatic turns, but that’s fine with her.
“The thing is, you feel more needed because people look to you for advice. They look to you for calm. They look to you for what actions they should take,” she added.
“It’s one of the reasons I’m in this business, to help people. In times like this, I feel more needed than ever.”
This story contains information from The Associated Press and AP Business Writers Alex Veiga and Damian J. Troise.