Market Musings

Lauren Young

I've received a bunch of emails with commentary on the market's dipsy doodleling. Here are some highlights. (These investors really have some great names, incidentally. Straight out of central casting!) Feel free to chime in with your own thoughts!

Wayne Wicker, Senior Vice President & Chief Investment Officer of IMCA-RC, and CIO of Vantagepoint Investment Advisers LLC.

Whenever the U.S. stock market experiences a sharp decline in value, investors wonder, “Should I sell?” Usually this is a mistake. All investing carries some risk. But as the accompanying ICMA-RC market analysis shows, volatility has been a common element in the market’s record for decades.

While the S&P 500 index has averaged gains of about 10 percent annually from 1926-2005, it is unusual for the index to return 10 percent in any given year. Indeed, in only five of those 80 years (about 6.5 percent of the time) has the index returned the “average” 10%. Most annual returns are either above or below the norm.

ICMA-RC consistently advises its retirement plan sponsors and participants to ride out the rollercoaster. Building retirement security takes decades to accomplish. It is “time in the market” and not “market timing” that rewards investors.

Nick Massey, Regional Vice President at Householder Group, over $4 billion in assets.

The market has been long overdue for some kind of correction and is still well within our trading ranges and has not broken predictable major support levels. What we are seeing now is typical sell-off after a bounce back. Short term outlook we are in a strong support area and volatility will continue for the next few weeks.

This is a market event more than an economic event.

Adam Bold, CIO of The Mutual Fund StoreT, with approximately $3 Billion in assets.

Investors need to be psychologically prepared in the event of a market correction like we've seen this week. While many investors may use this scare as an impetus to change their portfolio, they have to be careful of being too emotional. After all, we haven't experienced market corrections on the S&P for a long time. We are telling our clients to be careful before cashing in their chips or buying on the dips.

Bill Buechler, President of Barclay Partners Asset Management, with $300 million in assets.

Market move was not unexpected since we haven't had any corrections. Tuesday was a one-day wonder. It was a market event not an economic event. No expectation of a recession. Money is everywhere and as long as money's everywhere things are going to be good.

This is a fabulous opportunity to put cash to work. We've been waiting for a correction to put out the rest of his cash and you can't have a correction without things getting messy.

Heath Bray, VP at WealthTrust-Arizona, with $600 million in assets.

I think that the short term effects, while somewhat extreme, could either be a short term profit taking correction, lasting as long as three months similar to the last big Asian correction in '97 like the one China experienced Monday, or it may indicate that the market is preparing for a full blown recession. Greenspan seems to think the latter, and that's nothing really new. The Fed will be under more pressure to ease rates soften the landing.

Diversity is the name of the game in these environments. Alternative investments are very valuable, but can really show their worth in times like this. The unfortunate thing is that "non-correlated" means that sometimes the alternative investment is positively correlated, or it moves with the stock market, and sometimes negatively correlated, or it moves opposite the market. This was evidenced by our worst single day performance in over a year in our managed futures program Tuesday, coinciding with the pullback in the stock market. This, while unfortunate in the short term, does not give us any reason to be alarmed. With movement like we have seen in the interest rate, stock indices, and currencies futures markets, we expect to have some additional volatility, both positive and negative.

Michael Church, Portfolio Manager, Church Capital Management. +$2 billion in assets

The market turbulence has been nasty and near term it shakes things up, but long term it does not change much. Investors need to be patient and not act irrationally. We are in a holding pattern, not buying or selling.

Harry Clark, CEO of Clark Capital Management Group. $1.2 Billion in assets.

"We are sticking to our forecast of an 8 to 12 percent correction, before the volatility is over. In the end, we'll expect a recession by the skin of our teeth."

Bill Schultz, CIO, McQueen, Ball & Associates. +$800 million in assets.

We're looking for continued turbulence short term and do not think the market will go off the cliff. We are not forecasting a recession, just a slowdown in growth.

Jeff Layman, CFA, Director of Investment services, BKD Wealth Advisors, Springfield, Mo, with $1.3 billion under management.

"We've probably all been lulled into a false sense of security by a seemingly risk-free environment.

Obviously, a 3 percent sell-off in a day, is a fair amount, but we're still up 20 percent since August.

I wouldn't be too worried because risk is still moderate and well contained."

Ron Kiddoo, Chief Investment Officer, Cozad Asset Management, Champaign, Ill, with $500 million under management.

"For the last six months, all the people have talked about is the need for a market correction. Now that we have one, people are panicking. What has really changed? The economy is still humming along. Aside from an off-the-cuff comment from Greenspan and some activity from China, nothing has changed. It's amazing how stable the market has been for a couple years."

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