Local investment professional Bob Willis has a message for anybody watching the stock market’s steep decline over the past several weeks.
“This is the nature of the beast,” Willis said. “And it’s totally normal.”
As president, CEO and chief investment officer at Willis Investment Counsel in Gainesville, Willis and colleagues manage about $1.6 billion in assets for clients across the country. It’s the state’s largest independent investment management firm north of metro Atlanta.
Like many others in his trade, Willis has watched closely this week as the Dow Jones Industrial Average, Standard & Poor’s 500 index and the Nasdaq composite slid into what’s known as correction territory.
A “correction” is a Wall Street term for when an index falls 10 percent from its most recent high. The Dow fell 558.40 points Monday to 15,871.35, which is 13.3 percent below its record close of 18,312 set on May 19.
The U.S. stock market entered into its last correction in October 2011.
“The market has had a long period of time without a correction,” Willis said. “The market has its own timetable, and periodically it’s normal to have these kinds of episodes. It’s like having thunderstorms in July. It happens.”
On Monday, concerns over a slowdown in China’s economy rattled global markets. U.S. stocks surged in early trading Tuesday after China’s central bank cut its key interest rate, but the Dow Jones closed down another 204.91 points by day’s end.
Investors have wrestled with uncertainty over these matters, as well as the timing of a long-expected interest rate hike by the Federal Reserve.
Willis said it is indeed a “confluence” of factors.
While some might attempt to compare current market conditions to those of 2008-09, Willis cautions that “this is a totally different situation.”
“This is not that at all,” Willis said. “In ’08 and ’09 there were serious structural issues. The basic banking system had serious weaknesses then … and you had issues with housing.”
Currently, he said, “housing is on the upswing nationwide and locally. Generally speaking, real estate, housing and construction are quite robust right now.”
He said stocks faring the worst during this market fall are energy-related companies and commodities such as iron ore “because they move in sympathy with oil prices.”
Popular stocks like Facebook, Amazon, Google and Apple have also taken a hit “because they’ve become so popular and overvalued.”
For those less worried about the overall implications of the market decline who are more concerned with how it affects personal investments — especially those with 401(k) savings — Willis offered the following: “My advice is do nothing. We forget sometimes that the decision to do nothing is a decision itself. The success of a portfolio is the sum of investment behavior over time and the behavior of the investor.”
Added Willis: “Most investors fail because of emotional responses. I think a good decision right now is to sit tight and don’t over-respond.”
The Associated Press contributed to this report.