The Market Is Melting Down and People Are Feeling It. ‘My Stomach Is Churning All Day’


The last time

Todd Jones

heard this kind of panic in his clients’ voices, it was 2008 and the global financial system was on the brink of collapse.

Mr. Jones, the chief investment officer at investment advisory firm Gratus Capital in Atlanta, now finds himself fielding similar calls. Two clients, both retirees, asked him this month to move their portfolios entirely to cash. Mr. Jones persuaded them to stay the course, saying the best way for investors to achieve their goals is to still be in the market when it eventually rebounds.

“Those people were not in a good place,” said Mr. Jones, 43. “They had a lot of anxiety about goals and dreams and being able to live their lifestyles.”

Stocks, bonds and other assets are getting hammered this year as investors wrestle anew with the possibility that the U.S. is headed toward recession. On Friday, the Dow Jones Industrial Average recorded its eighth straight week of declines, its longest such streak since 1932. The S&P 500 flirted with bear-market territory.

Families are watching the investments they meant for down payments or college tuition or retirement shrink, day after day. They’ve seen big retailers like

Walmart

and Target record their steepest stock drops in decades this week, after earnings that signaled an end to the pandemic spending boom.

The market turmoil has scared corporate chieftains away from taking their companies public. In Silicon Valley, dreams of multibillion-dollar valuations have been replaced by the reality of layoffs and recoiling investors.

Stock prices have been hurt by forces that appear in nearly every cycle, such as rising interest rates and slowing growth. There are also idiosyncratic ones, including the rapid return of inflation after decades at a low ebb, a wobbling Chinese economy and a war in Ukraine that has shocked commodity markets.

The Federal Reserve has raised interest rates twice this year and plans to keep doing so to curb inflation, but that makes investors worry it will slow the economy too fast or by too much.

S&P 500 bear markets and the current downturn, declines and duration

Current downturn

96 trading days

Current downturn

96 trading days

Current downturn

96 trading days

Current downturn

96 trading days

Current downturn

96 trading days

To investors it can feel there is no safe place. While the vast majority of individual investors are holding steady, that is in part because customary alternatives don’t offer much relief. Bonds, normally a haven when stocks are falling, have also been pummeled. The cryptocurrency market, pitched as a counterweight to traditional stocks, is sinking.

For

Michael Hwang,

a 23-year-old auditor in San Francisco, the market’s tumble means he could wind up taking out loans to get an M.B.A. He has been hoping to pay his tuition out of pocket when he eventually goes back to school.

For

Arthur McCaffrey,

an 80-year-old retired research scientist from Boston, it means wondering if he’ll live to see his investments recover.

Rick Rieder,

the head of fixed income at giant asset manager

BlackRock Inc.,

likened the state of financial markets to a Category 5 hurricane. The veteran bond trader has been in the business for three decades and said the rapid price swings are unlike anything he has seen.

Rick Rieder said many of the things rattling the markets are out of the Federal Reserve’s control.



Photo:

Alfonso Duran for The Wall Street Journal

“My stomach is churning all day,” he said. “There are so many crosscurrents of uncertainty, and we aren’t going to get closure on any of them for weeks, if not months.”

Investors are used to the Fed stepping in to calm markets, but many of the dynamics rattling stocks, bonds, currencies and commodities are out of the central bank’s control, said Mr. Rieder: “The Fed can’t solve the supply shortage of corn or fertilizers, or the inability to get natural gas into Europe. They can’t build a sufficient inventory of homes.”

The plunge is a U-turn from stocks’ runup in 2020 and 2021. Then, unusually low interest rates and a surging money supply—byproducts of the government’s efforts to stave off a downturn—pushed stock indexes to repeated new highs. Some investors say the decline was long overdue and, now that it has arrived, could be difficult to repair.

“The Fed is going too far, inflation is a nightmare and the real-estate market is going to crash,” said Melissa Firestone, who sold many individual stocks in a retirement account last year.



Photo:

Firestone

Melissa Firestone,

a 44-year-old economist specializing in the energy market, sold many of her individual stocks and bought a fund that shorts the S&P 500, betting on a drop. “The Fed is going too far, inflation is a nightmare and the real-estate market is going to crash,” she said.

Keith Yocum,

a novelist and retired publishing executive who is 70, moved a third of his savings into money-market funds last year. Mr. Yocum doesn’t love keeping so much money in cash, especially with inflation eroding its value, but sees few better options.

In October, when stock prices were still hitting records,

Craig Bartels

moved most of his 401(k) and individual retirement account savings into money-market funds. Soon, he sold his cryptocurrency holdings and started shorting homebuilding stocks and

Tesla Inc.

through a brokerage account.

A 46-year-old real-estate broker in Zionsville, Ind., Mr. Bartels had looked to the distant past for advice, reading

Ray Dalio’s

recent book on economic history and Adrian Goldsworthy’s “How Rome Fell: Death of a Superpower.”

“This sounds like us right now,” he thought.

His 20-year-old son, a college student, had told him he was trading a few thousand dollars through a

Robinhood

account. To Mr. Bartels, it looked like another sign of a coming reckoning.

A generation earlier, he was a day-trading college student himself. He did well, he said, but knew many who were “throwing money at internet stocks and had no idea what they were doing.” The dot-com bubble of the late 1990s soon popped. Today, Mr. Bartels is happy he changed course when he did. “I don’t think we’re anywhere near the bottom,” he said.

“I don’t think we’re anywhere near the bottom,” said Craig Bartels, a real-estate broker in Indiana.



Photo:

Anna Powell Denton for The Wall Street Journal

Don McLeod,

a former research manager at a Manhattan law firm, retired four years ago when the markets were strong. He checked his 401(k) account almost every day with glee.

When stocks started to turn in January, he continued checking daily out of fear, until the losses became too steep. By early May, his retirement accounts had fallen 25% in five months.

Mr….



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