Louis Orzolek said he wasn’t fazed by Tuesday’s mini-meltdown on Wall Street. In fact, he may start looking for bargains.
“It is a good time to buy,” said Orzolek, 73, a retired dentist living in Denver. “The markets have gone down more than this before.”
Orzolek said he didn’t panic following market routs in 1987 and 2001. He said this time he would likely pick up additional shares of Johnson & Johnson, along with shares of a few technology companies.
“I’ll have to follow it day by day,” said Orzolek, who said about half of his portfolio is invested in stocks.
Markets worldwide took a nose dive Tuesday, as fears about an economic slowdown prompted the biggest one-day point decline for the Dow Jones industrial average since September 2001. The Dow fell 416.02 points, or 3.3 percent, to close at 12,216.24.
How should small-time investors respond?
“I would sit tight,” said Fred Taylor, principal of Denver- based Northstar Investment Advisors. “In the big picture, this is a well-needed correction.”
Taylor said he fielded a handful of calls from nervous investors wondering why their portfolios were taking a hit. He pointed to a sell-off in China, a decline in durable-goods orders and concerns about the housing market.
But, Taylor added, “The fundamentals haven’t changed in the last two days.”
“This may be a buying opportunity when it all settles out,” said Taylor. He recommended that investors consider buying blue-chip stocks that may now be undervalued.
However, Taylor cautioned that stocks might have further to fall. If investors believe that, they should wait to cash out until there’s an upturn, even if it’s only momentary, he said.
“We certainly wouldn’t put new money to work” today, said David Prokupek, chief executive of Denver-based Geronimo Financial. “There’s another 3 percent to 5 percent that could come out of the market. This may be the start of something systemic.”
Tom Roseen, a senior research analyst with Lipper in Denver, said people who recently entered the market will likely be hurt the worst.
“There are people who just got in the market, said we need to be in China, and they are probably hurting today,” said Roseen.
The Shanghai stock exchange fell almost 9 percent Tuesday, which prompted markets to slide in the U.S., in Europe and elsewhere.
Roseen said the declines overseas could be especially painful considering that investors flocked to international funds last year. In 2006, investors funneled nearly $73 billion into U.S. mutual funds. By comparison, $146 billion went to international equity funds.
“People have been trying to chase performance,” said Roseen, “and they may now be disappointed.”
He pointed out that China-region funds returned 61.5 percent on average last year; world equity funds were up 25.6 percent; and U.S. diversified equity funds gained 12.3 percent.
Taylor said one possible silver lining is that the Federal Reserve might now be willing to lower interest rates, which would help kick-start economic growth in the U.S.
But it’s unlikely that Tuesday’s dive will persuade the Fed to do that, said Anthony Chan, chief economist for JPMorgan Private Client Services. Chan said the Fed would lower rates only if inflation further eased and if the unemployment rate moved higher.
Chan said he still expects the S&P 500 to recover, predicting that the index will gain as much as 9 percent this year. He suggested that investors consider buying midsize companies that may now be especially attractive to private-equity firms, which are flush with capital and on the hunt for returns.
“I don’t see any panic out there,” said Chan, based in New York. “I think this decline is part of a correction and the markets will snap back.”
Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.
