By Suzanne McGee, Nupur Anand
(Reuters) -Individual investors have been working the phones for advice in the wake of U.S. President Donald Trump’s sweeping tariff announcements which have sparked fears of a recession. Among the most nervous are those approaching retirement, as the market slide wreaks havoc with portfolios.
Still, despite the trillions of dollars wiped off stock market values, most have been riding it out rather than ditching everything and moving to cash, financial advisers said. The S&P 500 is 18.9% below its February closing peak and down 12.1% since Trump’s April 2 tariff announcement. On Tuesday, the index closed below the 5,000 level for the first time in nearly a year.
“Our job is to keep clients in their seats and not panicking,” said Rafia Hasan, Chicago-based chief investment officer for Perigon Wealth Management. “Yes, we’ve had clients – including some who aren’t normally nervous Nellies – ask whether this time they should be moving to all cash. But so far, thankfully, nobody has done it.”
Those approaching retirement – even if they have been working with financial advisers for many years and listened to many “don’t react emotionally” speeches – appear notably more nervous this time around, however, said Hasan. While individual retirement funds or 401(k)s can end up with relatively modest 60% allocations to stocks, they still get hit by selloffs, and younger retirement investors can have much larger stock portfolios.
Households generally have a historically high exposure to equities, leaving them exposed to sharp falls and leaving the economy vulnerable if they pull back on spending. Recent data from Ned Davis Research shows that stock market holdings made up of 48.2% of household financial assets, up from 37.8% prior to the global financial crisis of 2007 and 2008.
“The reality is 62% of Americans now invest in equities,” Larry Fink, CEO of asset management giant BlackRock, said on Monday at an Economic Club of New York event. Those investors may see another 20% of downside, he warned, but still described the selloff as offering “more of a buying opportunity than a selling opportunity.”
Austin Fitch at Horizon Investments said that while the number of inbound calls from anxious clients has climbed 50% or so in the last week, only about 10% to 15% of his clients are making rash decisions to do something that he fears will “come back to bite them at some point in the future” by moving to cash or making large reallocations.
“The easy decision is getting out. The hard decision is knowing when to get back in.”
Recent selloffs have underscored that, said Malcolm Polley, chief market strategist for Stratos Investment Management in Beachwood, Ohio.
“You can’t get out of cash fast enough to be back in the market when it snaps back again,” he said. “It’s too late to protect yourself from the selloff now, probably, so the question becomes how to keep from making a stupid mistake.”
Still, there is a case for increasing the cash allocation recommendation for clients due to market volatility, one analyst said.
“This is a great time to have dry powder so if a bargain opportunity comes up, you are ready to scoop it,” said Paul Beland, global head of research – wealth management at CFRA.
CFRA recently recommended clients to increase cash allocation to 10% from 5% and reduce exposure to bonds to 25% from 30% earlier.
RIDE IT OUT
In total, Vanda Research, a firm that monitors and analyzes market trading activity, calculated that retail investors bought a net $5.1 billion of stocks on Thursday and Friday, while Wealthfront, an online financial advisory platform catering to affluent millennials and young professionals, reported a surge of more than 300% in investment account deposits on Thursday alone.
“We are not seeing retail investors capitulate,” said Kevin Gordon, senior investment strategist at Charles Schwab. That is noteworthy, he added.
Individuals who entrust their accounts to professional advisers are hearing a lot of advice to just stay put and not panic and many of those advisers say the majority are listening.
On Monday, self-directed retail investors were buyers of market darling Nvidia, according to data from Fidelity Investments, with 72% of the firm’s brokerage clients active in the stock, placing “buy” orders and helping to drive the chipmaker’s stock nearly 11% higher on the day.
Wealth advisers like Fitch and Polley, whose clients may have a few million dollars or more invested, are drawing up selective buying lists.
Younger investors, with time to recover ground after the selloff, appear more willing to listen to advice or to buy the dips, advisers said.
“Our older clients are more anxious, have shorter time horizons and are more likely to ask about risk, while the younger group want to know about opportunities to take strategic sales for tax or portfolio reasons and ask us about what we should be buying,” said Anne Marie Stonich, chief wealth strategist at Coldstream Wealth.
Meanwhile, the universe of ultra-high net worth clients – those with portfolios of $5 million or more – seems to fall into three camps, said Stephen Parker, co-head of global investment strategy at JPMorgan Private Bank. One group is eager to buy the dip, a second has been sitting on cash and now wants to increase their risk exposure, and the third group is looking for ways to safeguard their portfolios.
“Since the beginning of the year, we have been recommending clients to add gold to their portfolio for diversification,” said Parker. “Additionally, some clients are interested in diversifying with more non-U.S. stocks, with the European market being their primary focus.”
(Reporting by Suzanne McGee in Providence, Rhode Island and Nupur Anand in New York; Additional reporting by Tatiana Bautzer in New York; Editing by Megan Davies and Matthew Lewis)
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