LI financial advisers say economy is strong despite Dow drop

The economy remains strong despite Monday’s 4.6 percent decline in the Dow Jones industrial average, Long Island financial advisers said.

“I’m looking to pick up new stocks or add to positions,” said Mitchell Goldberg, president of ClientFirst Strategy Inc., a Melville investment adviser.

Craig Ferrantino, president of Craig James Financial Services LLC, an investment and financial planning firm in Melville, said that investors who are saving for the long term should not abandon equities.

“I wouldn’t bet against the market,” he said. “The economy is looking very healthy.”

On Monday, the Dow fell 1,175 points. Though it was the biggest point decline on record, the percentage change was not near the record decline of more than 22 percent on “Black Monday” in 1987.

The Dow’s long climb has inflated the index, meaning that a given point decline is a smaller percentage move, Ferrantino said. A loss of, say, 800 points in the 1980s — when the average was much lower level — would have been far more painful in percentage terms than an 800 point decline today.

The Newsday Long Island Index of the region’s largest publicly traded companies by revenue fell about 3.6 percent on Monday. That followed a 4.3 percent decline last week. The index is down about 5 percent for the year to date.

Goldberg said that Monday’s market sell-off can be traced to recent increases in bond yields. The U.S. 10-year Treasury note yielded 2.7 percent Monday, up 22 basis points — or 0.22 percentage point — in the past month.

Those higher yields “spooked” some stock investors, Goldberg said. Their selling led to automated program trades in which computers are instructed to buy or sell when certain levels are breeched, creating a downward momentum.

Ferrantino said that the stock market should remain strong even though the era of ultra-low interest rates may be coming to a close with rising rates.

“My sentiment is to buy into the sell-off,” he said.

He said the pullback could be an attractive entry point for new investors and should not sway people nearing retirement.

“A 10 percent correction is just part of the equation,” he said.

Homeowners, however, should lock in low mortgage rates before they go higher, Ferrantino said.

A Long Island bank executive said that “profit taking” by some investors is probably playing a role in the market’s decline.

“Wages are up, job creation is up and the GDP [gross domestic product] is up, so the market has been headed in the right direction” over the past year, said Douglas C. Manditch, chairman and chief executive at Empire National Bank. “But a lot of people have said the market is a little overpriced. So that could be why it’s going down. I don’t see it as a big threat.”

With David Reich-Hale

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.