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Program's message: Downturn is normal

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By Jennifer DeWitt | Monday, February 11, 2008 | No comments posted

The downturn occurring in the stock market is part of a normal cycle in the U.S. economy, and the worst thing an investor can do is get out of the market.

That was the advice offered Tuesday by Daniel Zude, Northwest Bank & Trust Co.’s portfolio manager, as the bank resumed its Financial Market and Tax Outlook program. About 125 of the bank’s trust customers, prospective customers and business leaders gathered for the luncheon at The Lodge in Bettendorf.

“The real reason why the stock market is correcting itself right now and the real reason why the economy is slowing down — the real reason is because it’s normal. It’s normal for the economy to boom and contract,” Zude, a certified financial planner, said. “The stock market was up five years in a row; it doesn’t need a reason to correct itself.”

Despite predictions about the country headed into a recession, Zude said he does not expect such an occurrence. He pointed to low interest rates and low unemployment as his reasons. While the stock market ended down in the last quarter of 2007, he said large company stocks were up for the year.

“Money got out of the stock market and flowed into the bond market. Bonds outperformed stocks for the first time in five or six years,” he said.

Zude did predict that first and second quarters of 2008 “won’t be particularly strong, but if we have a negative quarter I think it’s going to be first quarter.”

He also predicted measures being taken — from the Federal Reserve dropping interest rates to Congress enacting a stimulus package to pump more money in the economy — could produce a strong second half of the year. “I just don’t think we’ll see a recession,” he added.

But with a presidential election year in full swing, he said candidates are pointing to all kinds of reasons why the economy is down.

“What’s unusual about this is there is no incumbent president or vice president running, so they’re all kind of new people. It’s the new people’s job to make things going on in the economy seem as bad as possible.”

Talk of the subprime situation, the housing slump, high fuel prices and other red flags are causing concern among investors.

“If you bail (out of the stock market), you’re getting out at the most inopportune time,” Zude said. “An investor has three options — buy, sell or hold. Selling is the worst one. At a minimum, try to do nothing. If you can, buy more,” he said, urging the audience not to “miss the recovery.”

Joining Zude in the program was Glenn Blair, a certified public accountant with Sitrick & Associates, Bettendorf. Blair offered a look at tax law changes and implications that investors should be aware of. “They won’t raise your taxes this year because it’s an election year. But they might next year,” he said.

Joe Slavens, the bank’s president and chief executive officer, said the economic outlook was a program the bank began under his father, the late Bob Slavens, and his uncle, Jim Slavens, who attended Tuesday’s luncheon. Slavens credited Cody Allen, a trust officer at the bank, with helping to bring back the program.

Jennifer DeWitt can be contacted at (563) 383-2318 or jdewitt@qctimes.com. Comment on this story at qctimes.com.