By Sarah Morgan
Investors ended the week with a nice boost to their stock portfolios today, but many financial advisers are telling clients to tune out today’s move and think longer term.
Buoyed by a strong consumer sentiment report and easing worries over the European debt crisis, the Dow jumped more than 250 points on Friday. The move up follows three consecutive days of three-digit swings for the stock market, and financial advisers say they’re expecting more of the same heading into next week. Even as many pros have abandoned their buy and hold strategies to regularly tweak client portfolios during the past few months of volatility, others say this recent bout of swings makes it extremely difficult to time – and perhaps not worth it. Even with today’s jump so far, they point out, the market is flat for the week.
Indeed, advisers say the high level of anxiety in the market is likely to keep the turbulence high in coming weeks. For starters, they point out that the VIX, the index used to measure volatility, has been consistently elevated for months. Another measure called “excess volatility,” is also up, which suggests that stocks are backtracking a lot more than they typically do, like a boat that’s tacking back and forth across the wind instead of sailing straight ahead.
Still, all that panic has not reached the level last seen in 2008, and some pros say it backs up their strategy of doing little — at least for now. No day this year has made it to the list of the top 25 biggest one-day moves on a percentage basis, showing that markets are agitated, but not crashing. “We’ve had a lot of movement and a lot of activity, but in terms of the overall market move we haven’t really gone anywhere in the last couple of months,” says Ryan Detrick, a senior technical strategist for Schaeffer’s Investment Research.
While some pros say they’re not making any big moves to cash, as many did when the volatility first picked up in August, they are still making some minor moves with client portfolios. For his clients, Paul Nolte, the managing director of advisory firm Dearborn Partners, says he tries to take advantage of down market days by making a wish list of stocks and snapping them up at discounted prices.