As the market (^GSPC, ^IXIC, ^DJI) faces a significant sell-off, investors are wondering what actions to take.
Allspring Global Investments senior portfolio manager and head of capital allocation Margie Patel joins Wealth host Julie Hyman to advise that investors should hold steady.
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Margie, what should investors do right now? They're looking at this sell-off, but by the way, it's not in, you know, sort of in in isolation, right? We've already seen stocks pulling off, pulling down this year. So, what should investors do as they see this happening?
Well, I think what they should really do is nothing because at this point, we really don't know what the effects will be on the tariff. It looks as if short term, it may be negative, but longer term, it looks as if it will be on balance positive for the US economy. Uh some of these unfair trade barriers really did hurt our domestic base and industrials, and I think that that will be corrected. And really these actions have been extremely sudden. We're not used to seeing that, and I think looking at uh President Trump's economic team, they are very smart, successful people, and it looked as if we're going to have disaster the way some of the stock prices tell us, I think they can pull back just as quickly as they advanced on these. So, bottom line, I think long term, it's positive for the US, and when we don't really know anything about the market, it's best to do nothing and uh and not follow the lead of really short-term traders who driven driven down the market pretty much this year.
Um do you think that there's a case to be made for taking any kind of defensive posturing in the market?
Well, from the uh the stocks have done the best, they all have gotten really hit the hardest. Those are the sectors that I think long term will still be the strongest. Now, for example, technology, industrials are related to uh capital expenditures and improving the electrical grid and also domestic energy which I think will be a strong area. Uh and I think like I say, I think it's important to keep in mind the volatility is really driven not so much by people who know more than the average investor, but really short-term traders, which is really dominating. I'd say way over half of all the trading. Uh I think actually then the financial crisis, giving up the uptick rule, which limited the downside uh action of stocks when people wanted to short, has really caused a lot of this volatility that's that's so disturbing.
But Margie, you know, it's not just short-term traders. People are worried, right? You look at consumer surveys, you look at CEO surveys, you look at some of the early indications we've gotten on earnings, none of that's been good. So you know, it's not as though the stock sell off is just based on only short-term traders. There are there are some bigger forces at work, no?
Well, that's right, and and I think the biggest force of all is coming into the new year. You really had to realistically expect rather modest growth in the US economy. Uh I was really thinking, say, one and a half, 2%, which is lower than uh many estimates, and I think part of that is we're seeing a deflation in stock values. Uh but still, when you look at the market we had before this, two fabulous up years, uh 25% for the S&P in in 2024 and 23. And then we had a down year previous to that. Before that, we had three up years, and we haven't had another down year since 2018. So I think we're we've been kind of spoiled with positive markets. Um but I do think when you look at even sectors like technology, yes, there's a lot of concern about the tariffs and and slower demand and so forth. But even if you haircut their growth rate, they many tech stocks are trading really with a lower price earnings ratio than the average S&P stock, or really uh slightly in line or a little above. So, we think that uh many of those are bargains, but I do think we aren't going to see the market stabilize until he has some something to crystallize, some positive event, whether it relates to tariffs aren't as bad as we thought, or there's a change, maybe the Fed will cut rates instead of keeping a stable policy. Uh so, I think we may have to wait another, you know, another quarter or so to see the market find its footing, and then I think it'll do better uh because the US economy is strong. In fact, you saw the uh the other day auto sales were very strong at a 17 million rate.
Well, that's because people were buying cars in advance of the tariffs, no?
Well, correct, correct, but still and all, if you don't have the money to buy a car, you're not going to buy a car. So, it's a very good current. People have money in their pockets to buy cars, even if you haircut back to 16 or even 15, that's still quite strong, indicating consumers they may be worried, but basically, the job market is okay. The numbers today were okay, um mixed, and looking at modest growth, which is what we're looking at. Uh so, we think that it's best to just hold tight, uh not pay attention to the market and say, "Well, you have to expect every few years, you have a negative year," and uh over time, you'll still make more money than if you were in risk-free assets.
