Experts urge cool heads among volatile markets
KANSAS CITY, Mo. _ Don't do it. Whatever you had in mind about the stock market, just don't.
Mounting uncertainty is playing havoc with Wall Street. Emotions are running amok. This is not the time to rewrite your
investment plan, said several money managers and investment advisers contacted Wednesday.
``Breathe in through your nose and out through your mouth,'' said Bruce Bower, who builds investment plans at Wealth
Management Advisors Inc. in Overland Park, Kan. ``You're going to come out ahead. This isn't the end of the world.''
Instead, it might be opportunity knocking. The consensus Wednesday seemed to be that crumbling Wall Street is littered with
bargains even as panic selling might be sweeping your neighborhood.
``If we're going to adhere to the rules, to buy low, now's the time to do it,'' said Douglas Coe of Moody Reid Financial
Advisors in Kansas City.
Coe's bullish sentiment echoed through several conversations as the Dow Jones industrial average whipped investors'
portfolios.
The Dow began the day by plunging more than 400 points. The blue-chip indicator crashed through 10,000 and didn't stop
until it reached 9, 654.64, its lowest point in a year.
Almost as quickly, the stock market turned. When it was all over, the market's pulse settled at 9,975.02, down about 1
percent, which isn't at all unusual in volatile times.
More than one expert blamed the four E's: the faltering euro currency, higher energy prices, next month's presidential election
and corporate earnings. Each is weighing on investors' confidence and driving down stock prices.
Add unrest in the Middle East and doubts about what the Federal Reserve will do with interest rates and you've got real
reasons that stock prices have become so volatile.
But the experts said they didn't think any of these forces would end the bull market.
Rich Jones, a portfolio manager at Mitchell Capital Management Inc. in Kansas City, dismissed earnings worries. A lot of
companies have warned Wall Street to expect disappointing news. Some bad numbers have come out.
But the warnings always come first and the good numbers are just hitting the market, Jones said.
Coe said earnings concerns were mostly the result of seeing such phenomenal growth in earnings for so long. Earnings are still
up, still strong, but not living up to overblown expectations.
``We were looking at that (previous earnings) growth and got spoiled,'' Coe said.
Jones also downplayed concerns about the presidential election. Neither Vice President Al Gore nor Texas Gov. George W.
Bush is a threat.
``The economy is too strong for either candidate to derail it,'' Jones said.
Writing on Monday, strategist Steven B. Young at Banc of America Capital Management Inc. recounted a list of blows the bull
market has shaken off: the Asian financial crisis, Russia's default, President Clinton's impeachment trial, the bursting of the
Internet bubble, six increases in interest rates, and now spiking oil prices and violence in the Middle East.
``Any one of these occurrences could have ended the bull market,'' Young wrote. ``But like a cat, the market may still have
several more lives to live.''
So what should investors do?
Novice and seasoned investors alike need to review their investment plans and stick with them, several experts said.
Even one bearish voice urged investors to revisit their game plan.
Randy Hedlund at Financial Management Consultants said he had been telling investors to lighten up on stocks. He wants to be
sure they follow the axiom that your age tells you how much of your investment belongs in bonds rather than stocks.
For example, a 40-year-old should have 40 percent of his portfolio in bonds and 60 percent in stocks. But chances are the
long bull market has pushed the stock portion beyond that original plan, he said.
Hedlund suggests switching out of some of the technology and growth stocks in favor of less volatile value stocks. He said that
the market's years of double-digit returns were over and that value stocks would hold up better.
``I'm going to keep my 60 percent in the stock market, but in value stocks,'' Hedlund said.
On the contrary, investors who have been fully invested on the way up should stay that way, said Howard Rothwell, a principal
of Stepp & Rothwell Inc., an Overland Park, Kan., financial planning firm.
``This is just part of the long-term cycle. They should have their long-term perspectives going,'' Rothwell said.
It particularly helps to keep an eye on your winners, Bower said, assuming you've spread your money among several kinds of
investments.
He said income and gains from real estate investment trusts, bonds, smaller-company stocks and value stocks had made it
easier for his clients to stomach recent losses from technology stocks and growth stocks.
``The reason we go through the trouble of diversification is for times like this,'' agreed Gary D. Smith, a vice president at First
Union Securities in Kansas City.
At the same time, if your plan was to ride the high-growth and technology stocks, then you have to stay put when the ride gets
rough.
``I wouldn't be too quick to move in any direction,'' Bower said.
Rothwell said investors who had the bad fortune to buy at the stock market's peak also needed to stay put.
``The one thing they shouldn't do is sell,'' he said.
Coe agreed that all investors had to fight the urge to flee if they have chosen stocks of strong companies such as Wal-Mart
Stores Inc. and Microsoft Corp.
``I am just totally averse to selling in a down market while the key fundamentals of these companies are in place,'' Coe said.
Instead, Coe invoked the adage of buying low and selling high. Right now many good stocks are low.
Rothwell said such advice applied especially to individuals who have missed the bull market and have been waiting for a chance
to get in. Stocks of many great companies essentially are on sale, he said.
``Intel is drastically cheap,'' he said, adding that shares of Novellus Systems Inc., which makes semiconductor equipment, are
an even better bargain.
Coe added Home Depot Inc. Smith added Sprint Corp.'s FON shares and Lucent Technologies to the shopping list.
``If you own those stocks, you should buy more. If you don't own those stocks, you have an opportunity,'' Smith said.
Bower, however, cautioned against a dash to the market. Just as enthusiasm pushed stock prices too high last winter, doubts
can drive them too low.
``You'd like to think most of the damage has been done,'' Bower said. ``But I don't know what's going to stop this.''
(c) 2000, The Kansas City Star.
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