EVANSVILLE — The current debate over the nation’s debt ceiling has sparked some questions and concerns about how the issue may affect individual investors, local professionals say.
“The concerns started coming in about a week ago, and they are coming from people who are either retired or very near retired,” said Mark Pettinga, president of Evansville firm Pettinga Financial Advisors.
“They just don’t want to revisit a situation like 2008/2009 again.”
The situation is uncertain and unprecedented, the advisers say, but their advice is a familiar investment refrain: Stay the course and don’t panic.
“Don’t be knee-jerking and trying to do some timing maneuvers,” advised Ken Sendelweck, president of private banking and wealth management at Jasper, Ind.-based German American Bank.
Most of German American’s customers, Sendelweck said, have confidence the situation will be resolved before the Aug. 2 deadline or soon thereafter. Because of that, he hasn’t had any clients panic and want to make wholesale changes in their investments.
“We haven’t seen a mass exodus (from investments) or just trying to run for cover,” Sendelweck said.
The best thing to do, Sendelweck said, is to keep your financial goals in mind and stick to long-range investment strategies.
Greg Donaldson, founder of Donaldson Capital Management, agreed.
“We’re long-term investors, and we believe that is still the best place to be,” Donaldson said.
“We don’t know that there’s a safer place to be than high-quality blue chip stocks and high-quality investment-grade municipal bonds.”
Some investors regard gold as a safe investment in uncertain economic times, but Donaldson said buying gold right now is “probably foolhardy in the short term.”
Buying gold as a response to the current situation, Donaldson said, is equivalent to saying that you think the nation’s financial uncertainty is going to be permanent.
Much more likely, Donaldson said, is that public pressure will force politicians to resolve the debt ceiling issue. Once this happens, Donaldson said, gold prices are likely to fall.
Gold rose $10.70 per ounce Monday on the New York Mercantile Exchange, to $1,612 per ounce.
Plus, Donaldson said, anything that investors come to regard as a sure bet — like housing was before the crash of 2008 — is usually best avoided.
Pettinga said he’s had some clients convert investments to gold or cash, but he said that’s a strategy that only makes sense for the truly risk-averse.
He has helped clients take a more defensive investment position — reducing their stock holdings, and moving to bond funds with a short- to medium-maturity period. Shorter term bonds are considered less risky than longer term bonds, Pettinga said.
But moving out of the stock market because of the fear of instability can also pose a risk, Pettinga said.
A debt-ceiling deal in Washington could cause a “relief rally” in the market where stock prices rise in response, and someone who leaves the stock market misses out on that opportunity, Pettinga said.
Amy Bouchie, a financial adviser with Ameriprise Financial, said some of her clients — mostly those close to retirement age — have worked with her to move around their money in case of debt ceiling-related volatility.
“I see a lot of people concerned because it’s on the news and it seems to affect everyone,” she said.
Some clients have chosen to reduce their government bond holdings, Bouchie said. Others are shifting money out of “emerging market” funds that invest abroad because they worry that the dollar might lose value if America’s debt rating slips.
Concerned investors, Bouchie said, should examine their investments, including the details of their 401K holdings, to see exactly where their money is.
And for those truly concerned, Bouchie advised, “get some advice from a professional — and try not to watch TV.”