Stock market slide has financial advisers buying low, rebalancing

Though most aren't ready to call a bottom, many are taking advantage of the pullbacks

Jan 15, 2016 @ 12:22 pm

By Jeff Benjamin

With global equity markets opening Friday by pouring more red ink on what has already been a brutal start to the year, a lot of financial advisers are saying they're embracing the pullbacks as a rational buying opportunity.

“Compared to where we were two weeks ago, you're buying on sale at these levels,” said Thomas Balcom, founder of 1650 Wealth Management.

After falling 6% this year through Thursday, both the Dow Jones Industrial Average and S&P 500 Index opened Friday down more than 2%, following a global market rout that started in China.

But that's just near-term noise to advisers like Mr. Balcom, who is checking in with clients to make sure they're still okay with him buying into some of these market dips.

“Sure, the market could go lower, but if you have a disciplined approach, this is a good time to put some cash to work,” he said. “When you rebalance, you're supposed to buy low and sell high.”

The January volatility is actually proving to be somewhat advantageous for those advisers who are starting their annual portfolio rebalancing processes.

“Now is an ideal time for evaluating client portfolios and rebalancing where they are light on equities,” said David Schneider, founder of Schneider Wealth Strategies.

“Nobody knows what the future holds, and I'm not a market timer, but stocks are cheaper now than they were when the Dow was at 18,000,” he said. “I think there's a reason to be cautiously optimistic, but all the leading economic indicators are still pointing upwards.”

Despite what could easily be defined as nerve-racking times for investors who might be tempted to start drawing parallels between now and the start of the 2008 financial crisis, this is an entirely different situation, according to Paul Schatz, president of Heritage Capital.

“This is a market event that is confined to the financial markets,” he said. “Stocks are not going down because of a huge economic meltdown or because the financial system is imploding.”

The “economy will continue to chug along,” Mr. Schatz said. He will be looking for strategic entry points as the market volatility continues to unfold.

“It's too early to call this a market bottom, but there is some increased panic and desperation, and that's the first building block you see when bottoms are being hammered out,” he said.

Even if he wasn't looking for buying opportunities in the market's recent declines, Mr. Schatz said he would definitely not be selling right now.

“When to sell is a question you could ask yourself the whole way down,” he said. “I'm not good at selling into a decline, so I usually don't; that's just not the way I do business. If I sell, it would be into some kind of a rally.”

After kicking off the year with its worst opening week ever for stocks, it's easy to see why some investors might start assuming the worst. But Theodore Feight, owner of Creative Financial Design, understands that market directions change all the time.

At this point last year, for example, the S&P was down 2.3% but rallied to finish the month of January up 2.2%.

“Short term, I think this is a buying opportunity,” Mr. Feight said, although he is holding off until after what he anticipates will be a January sell-off.

“I show the market being down and ending the month lower, and then taking off and maybe doing well through March or April,” he said. “I think you could make maybe 10% or 15% between now and April.

“If you're really looking for a buying opportunity, I think July will be a better time than now,” Mr. Feight said. He sees a gradual sell-off following his forecasted April peak, and likes July because it leads into the final run of the presidential election.

Like Mr. Schatz, Mr. Feight is focused on the fundamentals, which aren't signaling this is a time to head for the hills, just yet.

“At this point, there is no sign of a recession and there's no sign of a huge market downturn," he said. "People are just overreacting and not paying attention to what's going on.”

Rose Swanger, principal at Advise Finance, also subscribes to the big-picture theory of the current market environment.

“If you believe the general macroeconomic condition and fundamentals of the individual companies, then the market drops provide an awesome buying opportunity,” she said. “However, what you don't want to do is to catch the falling knife. So use the limit orders for purchase and stop-loss or stop-limit-loss for protection.”

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