FARGO – Financial advisers say investors should stay the course with their investments, and if they can, consider buying stock bargains following market losses tied to the United Kingdom’s vote to leave the European Union.
Bargain hunters might have already been working on that Tuesday, June 28, as the Dow Jones Industrials bounced back after two days of heavy losses followed the Thursday, June 23, “Brexit” vote.
The Dow had risen to 18,011 on Thursday, June 23, on optimism the UK would vote to stay in the EU, but dropped 610 points on Friday and 261 points on Monday before gaining back 268 points on Tuesday.
“I think it’s a buying opportunity,” said Greg Sweeney, chief investment officer of Bell State Bank and Trust.
Sweeney said that the nearly 5 percent sell-off in market value by the close of trading Monday is something that usually happens three times a year.
“Once you’ve hit 5 percent, it’s usually a buying opportunity. And we’ve hit 5 percent now. Maybe you don’t use all of your dry powder, but you use some of it,” Sweeney said, suggesting that investors look for stocks that offer good dividends.
Anyone investing in the market for the long term should stay the course, he said.
“Just remind investors that these market interruptions or disruptions” happen all the time, Sweeney said. “The most important thing is to stick with your investment plan, and not let this turmoil alter what your long-term investment plan is.”.
Keith Burck, an investment consultant for Alerus Securities, called Friday and Monday’s losses “another interesting time for the financial markets.”
“Nobody really knows how this will play out and how long it will take to play out. But we know some fundamental things will take place: The British economy will suffer worse than the rest of us,” Burck said. “And the strong U.S. dollar will cause money to want to come to the United States” for higher returns and relative stability.
“The good old U S of A investments suddenly look pretty good to people,” he said.
Burck, too, urges long-term investors to hold on to their investments, “and try to take advantage of the weakness. Even if you’re a long-term investor, if you have some liquidity” to buy some stocks on the cheap.
“From my own perspective, I think about a farmer and his land,” he said. “Nobody sells their farm just because commodities are going down. Why would you sell your assets because something happened over in Britain that will take years to play out?”
Sweeney said the vote should really have little to do long-term with the economies and stock values of the U.S. and Japan.
“I will even make the argument that it will have very little impact on the UK and the EU, for the reason that everyone in the UK has to get up and go to work in the morning, and so does everyone in the EU,” Sweeney said.
He said there are four things to keep in mind as Brexit unfolds.
The UK will be the first country to leave the EU, so that will create a roadmap for any other country that becomes disillusioned with EU membership, Sweeney said.
Moves by the EU to act in spite toward the UK could backfire, too, he said.
“Half of the UK’s exports go to the EU. To the extent that the EU is going to try and spite them, I will tell you that the U.S. will step in, Japan will step in, Australia will step in. That will keep the EU honest. “
A breakup will also take a long time, two or three years, Sweeney said, leaving time for a change of heart on the part of Britons.
Also, with currency markets in flux, the euro has appreciated against the pound, making buying from the UK cheaper and more attractive, he said.
“I’m in the camp, that I don’t see as much of a disaster given the current situation that I think a lot of economists do,” Sweeney said.
Burck said markets could stay more volatile for the rest of the year.
“We’re probably back in those high volatility periods again. So, be prepared for it,” he said.