The stock market drop has given complacent investors a wake-up call, according to an industry insider.
David Little, of Little Wealth Management Group of HollisWealth, fielded panicky calls and emails from clients startled by headlines about a plunge in equities, which he believed was overhyped and largely down to programmed trading.
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Little said that having had it so good for so long and with markets going up aggressively over the past year, many investors lost perspective when faced with a “one-day drop”.
“Let’s face it, since 2009, the expectations out there are crazy,” he said. “I’ve had phone calls over the past two days with people asking, what’s happened to my money? Have I lost my money?
“Jesus Christ, the stock market since Trump got elected is up 7-8,000 points and you have a one-day drop and now you’re panicking? You’re still up 12% on a year-over-year basis.”
He added: “All my clients here are asking, how much money have I lost? You have not lost anything. We don’t have all your money in the US stock market, we don’t have much in Canada, and we don’t have everything in stocks, equities.”
Little said his office was initially flummoxed by the identity of one caller because she had never called in before, while another stressed-out investor had based his retirement plan around marijuana stocks, which he had been advised against.
The portfolio manager believes this week’s market correction means people are going to have to be more realistic.
He said: “I had a lady phone me yesterday, she’s 87 years old. I actually didn’t know who it was at first because she has never called this office and she, and her husband, have been clients for 25 years.
“She called me saying, what’s going on with our portfolio? We’re worried we are going to lose all our money. I said you portfolio is up 12% year on year and that’s the numbers as of last night. It’s crazy the expectations right now.”
Strategically, despite yesterday’s rally, Little feels the drop in stocks has not gone far enough to correct overvaluations and make buying opportunities outside the oil sector attractive enough.
He said: “I hope we hit 10%. I think then it will shake up a lot of the people who have migrated to the Wealthsimple-type of platform, everybody who has moved to the ETFs – suddenly it’s not such easy money.
“I always have 34-35% fixed income and I carry 3-6% cash, so I’m hoping we get a 10% correction because right now, what I’m not happy about is that I can’t find any value out there aside from the oil patch. And most clients don’t have the stomach for that. If I get a 10% or 15% correction, I can now go back in and buy some of the things I wanted to buy.”
Little also said that fears over interest rates have been embellished and that the talk does not match reality.
“Rates aren’t going anywhere soon in terms of big jumps but you are not going to see rates go from 3% to 5% in the next 12 to 18 months. You may see interest rates go up a quarter-point or a half-point but now people are talking to embellish that. Now they’re like, ‘wow, we’re now expecting a half a point increase, that’s crazy’. That’s not a big increase.”
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