Financial advisers recommend long-term strategies

The stock market is sputtering, the Fed has slashed interest rates, and consumers are wondering if they should keep their wallets zipped.

But David Compere, vice president of Springfield Trust Company, said he doesn't think it's time to worry.

"I believe the fundamentals of the U.S. economy are still strong," he said. "Corporate profits are slowing somewhat, but I see this as a temporary decline. I see the changes in the stock market as an excellent buying opportunity."

According to Compere,"We can never predict what the bottom of the market will be. Many companies are selling at a discount, but are still strong companies and will probably not go out of business."

Temporary declines

Investors must distinguish between a temporary decline and a permanent loss, Compere said.

"Temporary declines happen on a somewhat frequent basis, but permanent loss only happens when you have panic selling. The market always has correction periods, and this is really the price you pay for the market to go back up."

Compere is telling his clients to hold the line. If they've planned properly, they won't need to sell, he said, and if they don't sell, they haven't lost anything.

Compere doesn't see the country as heading toward recession. " I personally do not believe we are," he said. "A recession is defined by having negative growth, but there are still companies out there having growth, and the economy is still expected to grow by 1 to 1.5 percent this year."

The aggregate

Bill Rohlf, PhD, professor of economics at Drury University, has a slightly different perspective. "What's happening in the market is not wonderful for the aggregate economy," he said. "Although the stock market is not the real economy, there is a connection. As people see the value of their portfolios dwindling away, it affects their consuming behavior. We're not yet in a recession which is defined as two consecutive quarters of a declining (gross national product) but it could happen."

As to the notion that stock market losses are only paper losses, Rohlf said that investors' responses to their losses depended on where they came in.

"If I buy at 10 and it goes up to 20, and then it drops to 12, I'll feel a lot differently than if I buy at 10 and it drops to six. But when we invest, we have an objective in mind," he said. "A market drop pushes the objective further away, and we have to save more and spend less."

Holding on

Rohlf agreed that it is a good strategy to buy stocks "at the bottom," but added, "except no one knows where the hell the bottom is. When are stocks really low? Will they drop further? Think long term. Hold onto your investments and ultimately you will make money but you don't know what the time horizon is."

He is, however, not worried about a recession and expects only a modest economic downturn, citing confidence in the Fed. "The unknown is what will happen in foreign markets, which could make things worse," he said. "If the Fed continues to be aggressive, things will be OK. And they're the group that should be carrying the ball."

Dave Elliott, associate vice president of American Express Financial Advisors, said that in his profession, "We can't pick which investment will be best, but our role is to help you deal with the emotional impact of the market."

The equalizer

According to Elliott, the market goes up and down, but it does it in an upward fashion, and right now his company is advising clients to regroup and look at long-term goals and objectives. "If you have money in the market," he said, "retain your positions. Recognize that time is the great equalizer."

Does Elliott see a recession brewing? "No, I don't," he said, "because due to 401(k)s, the marketplace is different than it was 20 years away. With a 401(k) you put the money away and forget about it, and it stays invested long-term. Interest rates are coming down and unemployment is low, and what' s going on in the marketplace is mostly emotional. People who are happy to buy at sale rates anywhere else still want to buy high in the stock market. If you invest at the bottom, over time the market will go back up."