From Wall Street big shots who've lost big bucks to millions of smaller investors on Main Streets around the country, the weakening stock market has made for trying times. One question is whether the worst is over.
Many seasoned market veterans refuse to say precisely what they think about that. But they do offer some pointers for people on the verge of panic.Their first piece of advice is to fight the selling urge. Just because the herd may be heeding it doesn't mean it's the right thing for everyone to do. Long-term-minded investors, for instance, who have stashed away savings in mutual funds for retirement or college tuitions shouldn't be cashing out.
So far, most of the selling apparently is from the heavy-hitters, like large institutions, that are dumping equities to cover losses in bonds, currencies and so on, according to anecdotal evidence cited by market analysts.
If the urge seems irresistible the longer it takes for the rising tide of selling to crest, investment strategist Katherine Hensel of Lehman Brothers said reviewing history could help counteract the inclination.
The rewards of stockownership over time outweigh the gains from alternative investments, she noted. For the past 30 years, from 1949 through the third quarter of 1993, the average stock price appreciation annually has been 8 percent. Adding the increases in dividends, which averaged about 4.8 percent yearly over that time period, the total return approached 13 percent each year.
"If you held stocks historically you've consistently beaten other types of investments," Hensel observed. "And investors should just hang tight now because timing the market is difficult if it's not your full-time job - or even if it is your full-time job."
Robert L. Rodriguez, senior vice president and a portfolio manager at First Pacific Advisors Inc. in Los Angelos, recommends that investors ignore the big picture, especially if it looks too gloomy. Don't get worked up about steep drops in the popular market performance yardsticks, such as the Dow Jones industrial average.
"I worry about one stock at a time," he said.
Despite the reassuring lessons of the past and professional recommendations for the present, some investors will feel uncomfortable sitting on their hands in the future.
The money-spinning bull market over the last 31/2 years has lulled people into a sense of complacency and numbed them to the risks associated with investing. Now, as people watch their paper profits disappear, they want estimates of the potential damage their portfolios could suffer.
So, for all the anxious investors out there, here's the bad news. Some pros say the current "correction" - or period of declining stock prices - could last a lot longer.
Joseph McAlinden, chief investment officer at Dillon Read & Co. in New York, said the downturn that originated when the Federal Reserve shifted toward a tighter monetary policy course in early February could run through the end of the year.
Gail Dudack, market strategist at S.G. Warburg & Co., doesn't see an end in sight before the third quarter.