Stacy Bush

VALDOSTA — The Dow Jones Industrial average dropped more than 1,100 points, or 4.6 percent, by closing time Monday, Feb. 5.

While the drop has been making headlines on major news outlets, the Bush Wealth Management team has some advice on what residents should expect from the volatile changes in the Dow Jones.

The Dow Jones is comprised of 30 major companies and is used as a barometer to gauge the local economy, said Kent Patrick, wealth advisor and chartered retirement planning counselor. However, the Dow Jones is not always the best gauge to use.

“There are many large companies not included in the Dow that we use on a regular basis,” he said.

CEO Stacy Bush compared using the Dow Jones as a barometer to checking one tree in an orchard.

“Imagine going out and looking at your orchard of pecan trees,” Bush said. “And you have one out of a 100 trees that are buggy and not producing, but that is not a reflection on the whole orchard.”

Patrick recommended using the S&P 500 because it includes 500 businesses located in the United States, he said. The Dow Jones is used as opposed to the S&P 500 because it uses larger numbers.

However, the S&P dropped 93 points, or 4.1 percent, as of closing time Monday Feb. 5.

How do these drops in the stock market compare to other major drops in history?

“There have been 20 drops in the history of our economy that have been worse, or larger than this,” Patrick said. “It is not even in the top 20 worst pull-backs in one single day.”

And the drop in the stock market wasn’t a localized event, Bush said. Markets across the world had volatile fluctuations Monday.

So what is causing the fluctuations? Bush said the volatile changes are normal.

“When you look at the fundamentals of our economy, and something continues to go up, and up, and up, based on the history of our market, we knew there was a healthy pull-back in the near future,” Patrick said. “We didn’t know when, and you never know how much until it happens, but this is very normal.”

Bush gave an analogy of how the economy currently looks in regards to the stock market plummeting.

“The fundamentals of our economy are very, very strong,” Bush said. “So, if you can imagine the dashboard of your car, you’ve got 20 different gauges we look at on a regular basis. And 17 our of 20 of those are blinking green, which means everything is healthy in the economy.

“But often, the stock market does not reflect the underlying economy, and that is why we are seeing the stock market doing crazy stuff right now. I would say the fear gauge has been ramped up a little bit.”

So, with this being a normal response in the stock market, Patrick said investors should play the long game, and for those that have not invested in the stock market, now may be good time to do so.

“For people who do have money invested in the stock market, it would be a good time to keep a long-term investment approach, and do not have all of your eggs in one basket,” Patrick said. “And for people who do not have money in the market, but are interested, this would be an opportunity to invest while the market is on sale.”

Patrick also recommended reaching out to a trusted financial advisor to check on one’s investments and to remember: “Time in the market is better than timing in the market.”

He said it is better to play the long game in the market as opposed to buying when the market appears to be low and selling when the market appears to be high, he said.

But for John Magnasco, a retired Valdosta State University professor, and his wife, Roberta, the recent drops have little to no effect on their investment plans.

“We are not terribly involved in buying individual stocks,” Magnasco said. “Our stuff is probably pretty stable. We buy portfolio stuff. We buy categories of securities in sectors. … We have been doing what we’ve been doing for the last 10 or 11 years. And we are just cruising right along. and that’s the way we want to continue.”

Jason Smith is a reporter at The Valdosta Daily Times. He can be contacted at 229-244-3400 ext.1257.