‘We Were Due For A Market Correction,’ Says Local Financial Advisor

After all three major stock indexes saw their worst openings since the financial crisis of 2008, and the Dow Jones Industrial average recovered just a few hundred points from a more than 1,000 point plummet in the first four minutes of trading on Monday, those with money invested are feeling scared.

Conspiracy theorists and regular consumers alike are worried a second recession could be in our midst.

According to Anthony Petsis, a registered principal financial adviser for Anthony Petsis & Associates, we were long overdue for the market correction that occurred Monday.

“A market correction is in the simplest terms, when for whatever reason, stocks that were going up in value pull back. For some people it’s disturbing, it’s big news, and the news outlets hone in on what’s happening,” he said. “They are all watching the market, and if the market is down, then so is their security.”

Petsis noted that since 2009, on average, the equity markets have tripled, and only one time since, in 2011, have we had a market correction of 10 percent or more. “We were due for a pullback,” he told LevittownNow.com.

For Petsis, it’s completely normal to have peaks and valleys in the market, in fact, it’s essential.

“Stocks need to have volatility,” he said. “If stocks were predictable, if you knew what they were going to do, they would only payout .25% a year. In order to make potentially good returns, there has to be some risk.”

According to Petsis, the public is focusing on four important reasons that are right now, determining the outcome of the market.

First, is the decline in the Chinese markets and the ‘lack of action’ by China’s federal reserve, The People’s Bank of China.

Second, Petsis spoke of mid-year earning reports that dictated the water in business was luke warm. “Mid-year earning were OK,” Petsis told LevittownNow.com. “But they were below what a lot of people expected for U.S. stocks.”

Third, he spoke of the expectation that the Federal Reserve will raise interest rates in September. The Federal Reserve, whose job it is to determine interest rates based on the health of the economy, may postpone raising rates due to the correction, according to Petsis, which he says is a good thing. “The market doesn’t like when rates go up,” he said. “Lower rates equate to a lower cost of borrowing and more people wanting to earn stock,” he said.

Lastly, in relation to poor performance of the Chinese markets, others are worried that since the Chinese are such big consumers, their poor performance could trickle down, effecting the rest of the United States economy. “China accounts for more than 15 percent of the world’s growth, so if they slow down it’s a problem, especially emerging markets,” said Alan Valdes, vice president of trading at DME Securities. “Emerging markets buy a lot of goods from the U.S., and if you see those countries continue to get hit, that will spill over to U.S. multinationals, which could lead to job layoffs here in the States.

According to Petsis, those that are only investing in the market for the short-term, shouldn’t be investing, but those who are investing for the long term, shouldn’t be ready to sell their stocks just yet.

“Most long term investors know this kind of stuff happens,” he said. “If anything I would say that it’s a good opportunity for someone that’s been thinking about investing, remember buy low and sell high.”

Petsis, although he acknowledges that this correction is part of the normal health of the market, wouldn’t advise anyone to not be scared, or that the market will quickly recover. “It’s anyone’s guess,” he said. “But if you are worried, I would seek help from a financial adviser to make sure your investments are all in the right place.”