After watching the numbers, you might be keeping a close eye on your stock investments or your 401K. The Dow fell 800 points today.
Eyewitness News’ Brad Byrd talks to Tom and Bryan Ruder with Stifel Ruder Investment Group about what this means for the Stock Market and Americans.
Brad Byrd: After watching the numbers, you might be keeping a close eye on your stock investments or your 401k. The Dow fell 800 points today. The bond market signaled a warning that has a record for predicting recessions. So, what does this mean for you? And joining me tonight are Tom Ruder and Bryan Ruder of the Stifel Ruder Investment Group – father and son. We’ve got two perspectives from two people from different generations. First thing I want to ask, after seeing all this fluctuation during the past several weeks, what in the world is going on? How do you read this Tom?
Tom Ruder: Keep in mind, what we’ve seen today, it seems like a lot of points, but in reality, it’s a little over a three percent drop. And traditionally we’ve seen corrections on annual basis of about 10%. So, if you look at that, it’s not as big as it nearly seems. Bryan brought some information for you, he’s my stat guy and he brought some numbers he might want to share with you.
Brad Byrd: A thousand-point drop – it was in what? 2015?
Tom Ruder: You are correct.
Bryan Ruder: August 24th.
Brad Byrd: He calls it a correction. What do you call it? Do you call it a correction?
Bryan Ruder: Yea. In a year’s time you’ll see a 10%. More commonly, you’ll see the 3% to 5% pull back. Those are pretty standard and pretty normal. These last few years, we haven’t seen those types of events very frequently, and that’s a little abnormal. But going back to 2015, you had that thousand-point drop day, but by the end of the day it only closed off 588. To be in the top 20% on down days, that’s what we really need to be thinking in terms of points – we need to be thinking in terms of percentage. Today, the market was only off by 3.05%. That doesn’t even come into the top 20% down days in the history of the Dow.
Brad Byrd: But the bond market – the word recession actually makes people nervous. They still have memories of the Great Recession of 2007. What do you put in that as far as what the Stock Market of Wall Street is telling mainstream?
Tom Ruder: Keep in mind that what you’re referring to is the inversion of the yield curve, where the two-year treasury is paying more than the 10-year treasuries. We had an inner day of the break down of the Yield curve and it inverted, it didn’t finish the day as an inversion. The yield curve at the end of the day was flat, which means two years and 10 years we’re paying the exact same rate. I think the rate was 1.58%. We’re seeing a lot of that happen because there’s a lot of global uncertainty. Bryan brought up that four years ago when we were here, we were talking about the same kind of issues that we are right now. 4 years ago, we were talking about the Trade War with China, we were talking about China’s economy slowing, well, we’re talking about that again today.
Brad Byrd: And tariffs.
Tom Ruder: And tariffs.
Bryan Ruder: And don’t forget about Germany being slower as well.
Tom Ruder: And Germany is slower. We have Europe that has slowed down as well. Janet Yellin, who was the former chairman of the Fed Reserve, came out and said that she doesn’t think inversion of the yield curve doesn’t always mean a recession. It may be different. You have to look at the US economy, and unlike the rest of the world, is still very strong. And that’s been a big help to us. But if the rest of the world catches a severe cold, we’re probably going to catch a cold too.
Brad Byrd: Ok, it trickles down and Bryan what do you think is going to happen tomorrow? It is so volatile.
Bryan Ruder: If you looked at the futures, they’re pointing up at right around 99 pts. So, that’s implying tomorrow when the market opens, that the market’s going to open up a little bit.
Brad Byrd: Ok, with that being said what advice would you give to an investor?
Tom Ruder: The real strategy is that you really need to have a plan. And most people who use a professional, in fact, do have plans. And you should adhere to that plan and stay that course. We get a lot of questions saying ok, what should I do with my 401K money? We think you should do nothing with it. You don’t sell it when it’s down. If you have some long-term money and you’re not getting a good return on it, now may be an appropriate time to put some of that in the market because – we use the analogy – the market’s on sale. And everybody likes a bargain.
Brad Byrd: You could make changes online right now to the pie.
Bryan Ruder: You could but you should probably stay the course. There’s a reason there’s a saying: buy low, sell high. Those drops you see like the 800 point drop, those can create opportunities for people.
(This story was originally published on August 14, 2019)