Veteran money manager Brian Kroneberger Jr. didn't sleep well last week — and neither did his clients — as markets whipsawed and the Dow Jones industrial average posted Tums-popping losses and heart-pounding gains on a daily basis.
Nervous clients phoned incessantly, he attended frequent meetings to discuss developments, and investors emailed him in the middle of the night, apparently unable to sleep and seeking advice. Do we sell now? Do we move it all to CDs? Is this a buying opportunity?
With all of the economic turmoil of late and the 2008 financial crisis fresh in his memory, Kroneberger, senior vice president of the Dyer Kroneberger Group at RBC Wealth Management, is an old hand in the vagaries of the markets. Still, he said, "It has been very tough."
And after all that fear and speculation, no clear market trajectory emerged. The Dow ended the week at 11,269, a mere 165 points lower than where it began Monday morning. By comparison, in early July, during what was considered a sleepy week on the market, the widely watched gauge of blue-chip stocks dropped more than 175 points.
Only one thing is for sure: Uncertainty continues to hover over the economy, and investors may continue to see outsized, unpredictable market fluctuations. Last week, the market rose and fell as investors tried to digest mixed economic news and concerns over the global economy, debt problems in Europe and Standard & Poor's unprecedented credit downgrade of the U.S. government. That uneasiness about an economic recovery remains.
"There's no question we're in an unprecedented environment of volatility," said Matthew Schiffman, global head of marketing at Legg Mason Inc. "That volatility is not just being experienced in the market; it's also being experienced by investors' emotions."
As the market took its wild ride, investors sought answers and reassurances to cope with insecurity about their mutual funds, 401(k) plans and other retirement portfolios. Money managers such as Baltimore's T. Rowe Price Group and Legg Mason responded by seeking to tamp down the panic and ramp up communications with investors.
Some investors pulled money out of the market, others couldn't bear to watch and some stalwarts decided to sit tight.
"I leave everything alone," said Liz Choinski, an investor and Harford County resident. "What goes down has got to come up eventually."
For Dan Finkelstein, the market volatility last week was too much and he avoided CNBC, one of his favorite channels.
"I tried to watch it a little bit, but you have to turn it off because it's painful," said Finkelstein, who works in the health care industry and lives in Laurel with his wife and a toddler.
Finkelstein said timing worked in his favor when he sold stock a few weeks ago to get settlement cash for a new house. Now he's not touching the rest of his portfolio, glad that he doesn't have to pick a time to sell.
"I was lucky more than anything," he said.
Stocks traded violently last week: The Dow plunged more than 600 points one day and regained much of the lost ground the next day, only to trade down again 24 hours later. Stocks rallied on the last two trading days.
"The market does not seem as bad as '08 to '09 because it doesn't appear we are losing a whole financial industry," Kroneberger said. "But it has similar feelings as before."
In fact, Ethan Cohen-Cole, an assistant professor of finance at the University of Maryland's Robert H. Smith School of Business, said the economy has been feeble since that last crisis started.
"Everyone sees weak unemployment, weak consumer spending and housing problems not going away," he said. "Everyone was waiting for the next shoe to drop."
From tweeting to emails and conference calls with thousands of clients, Legg Mason rushed to help investors make sense of the market gyrations.
The company tapped the expertise of its affiliate managers in Asia, Europe and the United States to get information to institutional and individual investors in real time, Schiffman said. It put together an investor outreach website, where clients could access briefing papers and recordings of conference calls with stock pickers such as the venerated money manager Bill Miller.
"Clients are understandably confused," Schiffman said. "We're asking our managers, 'What are you seeing? Can you bring some clarity to all of this? What signals should investors be looking at downstream to suggest the marketing is stabilizing?"
With the assumption that the volatility will continue, Schiffman said, Legg officials expect to maintain their "high-alert mode."
On Monday, the first day of trading after the U.S. credit downgrade, T. Rowe Price Group experienced increased calls from retail investors and 401(k) plan participants. The Baltimore mutual fund company receives about 10,000 calls on a typical day, and the call volume rose 45 percent that day. Spokeswoman Heather McDonold said the number of calls settled down as the week progressed and that it was significantly less than the volume of calls the company fielded in the early stages of the 2008 financial crisis.
Stuart Ritter, a Price financial planner, was one of the many employees who took calls from anxious clients, who were "trying to understand what's going on and what it may mean."
Ritter reminded investors that stock volatility is not unusual and to stick to their long-term investment plan.
"The phrase I started using is, 'Next Tuesday is not long-term,'" he said. "Right now, people are looking at the stock market and asking what's going to happen next Tuesday, Wednesday. This is money you're not using for years, for decades."
Ritter offered investors a reassuring statistic: The S&P 500 stock index posted an average annual return of 7 percent in the past 15 years through June 30.
"During that time, we had the tech boom and tech bust, the real estate boom and the 2008 financial crisis," he said. "Right now, it's uncomfortable in the short term. But over the long term, it's a very different picture."
Still, spooked investors cashed out or sought haven in safer investments such as money market funds during the past several weeks as congressional negotiations over raising the U.S. debt ceiling faltered before a deal was reached at the Aug. 2 deadline.
Investors pulled more than $10 billion from domestic stock mutual funds in the week ending Aug. 3, according to the Investment Company Institute. That was more than double the withdrawals for the same week a month earlier.
With average investors feeling battered by financial crises and the sluggish economy, the investment psychology of Americans is changing, leading many to shun stocks, said Jian Ni, an assistant professor at the John Hopkins University's Carey Business School, who focuses on consumer behavior.
"Previously, there's some market fluctuation, but the big picture is good and they still have hope and relatively high expectations," Ni said. After all of the "drama" in 2008, "they're not only lowering expectations, but they've become more vulnerable to any kind of market signal."
Kroneberger, the Baltimore money manager, said he tries to get some emotion out of the equation for his investing clients. Many, for instance, have "stop market orders" on their portfolios, which means stocks are sold if they fall under a certain value, said Kroneberger, who hosts a weekly financial show on WBAL Radio.
"It's not a perfect strategy, but it has helped us have normal conversations with clients as opposed to crazy conversations," he said.
Baltimore Sun reporter Liz F. Kay contributed to this article.Copyright © 2015, The Baltimore Sun