Stocks corrected sharply Monday, as advisers reiterated their calls for clients to stay focused on their long-term goals.
The Dow Jones Industrial Average tumbled nearly 1,600 points before closing at 24,345.75, down 1,175.23 points, or 4.60%. It was the largest intraday point drop for the Dow in history.
Many market watchers remained baffled about what prompted the sell-off: There was no major economic news or earnings reports from major companies on Monday. If anything, market participants were worried that conditions could breed inflation — a worry that has pushed the bellwether 10-year Treasury bond yield to 2.85% Monday from 2.41% at the end of 2017.
Advisers and their clients had few places to hide Monday. The Standard & Poor's 500 stock index fell 4.10%, the Russell 2000 fell 3.63% and the Nikkei 225 fell 2.55%. Gold rose just 0.25%, to $1,340.70.
Most advisers said clients have been taking the mini-crash in stride. "We've had a couple calls, but it has been quiet here," said Robert DeHollander, managing principal at DeHollander & Janse Financial Group.
Mark Bass, partner at Pennington Bass & Associates, said he'd gotten one email over the weekend, after the Dow fell 665 points on Friday, and none on Monday. "So far, the requests from the media have outnumbered those from clients," he said.
Of course, not every advisory practice has such calm investors. "We have our nervous clients who normally call on pullbacks, and that group is calling," said Austin Frye, CEO of Frye Financial Center. "We've been talking to them all afternoon. I tell them them the market, on average, has a 5% drop twice a year, and that we haven't had one in a year and a half. I also tell them that if they buy after a big drop, in the long term, they will never be disappointed."
Advisers are also reminding clients that if they are long-term investors, they should expect volatility. "We've been telling clients that markets being up so much is not normal," said Mark Beaver, a financial planner for Keeler & Nadler Financial Planning and Wealth Management. "We're looking at each client's situation and not trying to beat the market."
For many advisers, the market drop is an opportunity to make sure clients have enough cash to weather a downturn.
"What we've been telling our clients is: If you need cash in the next six to nine months, it should not be invested in the stock market," said Lisa A.K. Kirchenbauer, president of Omega Wealth Management in Arlington, Va. "This is a good time to reassess your short-term cash needs. Otherwise, stay invested and look for opportunities to take cash from the sidelines and invest for the long term."
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And for others, the downturn could mean a chance to buy stocks more cheaply. "I'm delighted by the downturn," Mr. Bass said. "U.S. stock prices are out of whack relative to earnings: Either the prices have to come down or earnings have to come up to justify the current level of prices. There's a little bit of solace in that we've had increasing earnings, but prices have gotten ahead of what earnings are."
And many advisers remained upbeat about the market's prospects. "I think it's just a hiccup in the bull market," said Andrew Mies, chief investment officer and partner for 6 Meridian, an RIA. "Last week's spike in bond yields definitely had an impact. It was the thing that people paid attention to."
"But if you look at fundamentals, earnings, the economy, globally, there's a synchronized growth spurt taking place," he said. "This drop could provide some floor to the market, but the floor could be where we were back in October or November as opposed to new highs."
InvestmentNews senior columnist Bruce Kelly and senior reporter Mark Schoeff Jr. contributed to this report.