CNY Investors: Some Perspective on Stock Market Losses Following China's Currency Moves
A Syracuse financial advisor is offering investors some perspective on the impact China’s economy had on investments, portfolios and retirement accounts. China is the world’s second largest economy...and when the dragon roars, investors here in Central New York can fear the consequences.
Morgan Stanley Wealth Management Financial Advisor and Vice President Scott Johnson quells concern of a currency war. He considers any panic a misinterpretation of China’s intent.
“Their economy is slowing. It was growing at 10 % for years, and now it’s growing at less than that. They have stated that it’s growing at 7 % so it does make fiscal sense for them to lower their currency."
China’s decision mirrors those made by the U-S and Japan to lower their currencies and, in fact, is not cause for alarm. Johnston describes the U-S stock market losses following China’s currency moves as a minor correction, which he says happens just about every year.
Johnston would like people to take a step back, and take an investor’s gut-check.
“Use these smaller corrections as a test of their portfolio and a test of their own emotional ability to handle the ups and downs of the market. Because if this is creating sleepless nights – or a big correction to someone’s (personal) portfolio, they really need to look in the mirror and say ‘can I really handle the volatility of the market?’”
Johnston advises investors to keep in mind the cyclical nature of the market... and to look at themselves as three separate investors.
“The first investor would be the money you need back in the first 5 years. The second investor would be the money you need in the following 5 years, so years 6 – 10. And then the last bucket would be anything you need back in 10 years or more.”
The market is apt to come back but requires that investors stay in it over time. Johnston says it's oversimplified to think a down market is a buyer's opportunity. But he notes "great companies" at "deep discounts" could be attractive if people have time to allow such investments to pay off.