Comment on Big slump is no cause to ditch stock market

By STEVE ROTHWELL, AP Markets Writer, Seattle Post-Intelligencer: Business
Tue, 10/21/2014 - 8:25am

Big slump is no cause to ditch stock market

Worries about a slowdown in global growth drove oil prices and global stock indices lower last week. Headlines about the spread of Ebola and the deepening conflict with Islamic State fighters in the Middle East also turned investors cautious. Investors fled to the relative safety of bonds, pushing up their prices and dropping the yield on the 10-year Treasury note to its lowest level in more than a year. Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank, says that big shifts in financial markets are a good time to change, or rebalance, the proportion of stocks and bonds held by investors. Since the financial crisis and the Great Recession, many investors have allocated too much of their portfolios to bonds, and shied away from stocks, Davidson says. The Barclays aggregate, a broad index of bonds, handed investors positive returns every year since the financial crisis, with the exception of 2013 when they gave investors a 2 percent loss. Before jumping back into the stock market, investors should look to at developments in commodities, says Jeff Kleintop, Charles Schwab's chief global investment strategist. Investors should view the stock sell-off as a "nuanced opportunity," not an opening to rush into the market, says Russ Koesterich, chief investment strategist at fund manager BlackRock.

 

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