Raymond A. Worseck's timing was either very good or very bad Thursday as the chief economist for securities brokerage firm A.G. Edwards & Sons Inc. came to Salt Lake City to give local sales agents his views on where the market is heading for the rest of the year.
Never mind the rest of the year, on Thursday it was going in the tank, and A.G. Edwards agents were too busy fielding calls from worried clients to spend much time on the big picture.But that's when you need to keep your perspective the most, said Worseck in an interview following a day in which the Dow Jones Industrial Average lost 83.11 points, a decline of 1.5 percent, for its second big loss of the week, and the Nasdaq index suffered a 3 percent drop, the equivalent of a 168-point decline in the Dow.
"We are in a normal cyclical correction," said Worseck. "My advice to people is to do nothing. Forget about investing for three months and enjoy the Olympics."
Worseck knows that advice will be hard to heed for a huge group of relatively new investors who have never experienced even a mild bear market over the past six years.
What downturns there have been were usually triggered by so-called "good news," reports that jobs are being created, people are spending, wages are rising . . . the sort of thing that makes Wall Street believe that inflation is just around the corner and with it, higher interest rates, which reduce the value of stocks and bonds.
But Thursday's selloff was triggered by bad news: weaker earnings reports by some of the country's most solid companies, particularly in the high-technology sector, which led the market charge for much of 1995 and the first half of this year.
So, is this really just a "normal cyclical correction," as Worseck terms it, or the start of something much worse? No one knows, of course; that's why stocks return, on average, over time, more than government guaranteed savings accounts. They're risky.
If it helps your piece of mind any, Worseck doesn't see any viable alternative to stocks and bonds as the best investment vehicles for the next 10-15 years. If you have some cash that you've been holding out of the market because you thought stock prices were too high, you can view this correction as a chance to jump in and pick up some bargains.
Otherwise, just sit still. "No one can time the markets consistently," said Worseck. "An investor may feel clever getting out of the market now, but how will you get back in?" To time the market, it's not good enough to be right once, you have to be right twice.
Besides, when you start trading in and out of the markets, the tax consequences and sales commissions can be more devastating than the drop in share prices.
A better move than trying to be all in the markets or all out, is to adjust your portfolio. A.G. Edwards did just that this week when it cut the percentage of stocks in its institutional investor portfolios by 5 percent. The current makeup of those portfolios is 50 percent stocks, 35 percent bonds and 15 percent cash.