Is it time to freak out about the stock market and the economy?

Rob Nikolewski, The San Diego Union-Tribune on

Published in Business News

In the hopes of cooling inflation, the Federal Reserve is expected to raise interest rates by the end of the year to about 3 percent.

"That will make bonds more attractive, stocks relatively less so," Timmermann said. "That will lead to some portfolio rebalancing out of stocks and into bonds. And the question is whether it will hit companies' earnings prospects because if those start dropping, that could lead to a reduction in investor confidence."

His advice for everyday investors is to "tread carefully and don't try to use strategies having to do with predicting the bottom or the top of the market because in these periods, it's just going to be extraordinarily difficult."

Mike Ryan, divisional vice chair of UBS Global Wealth Management and frequent guest on financial networks like CNBC, talked to investors Tuesday in La Jolla about navigating a rocky financial environment.

"We're coming off an extraordinary bull market and we were generating double-digit returns and interest rates were coming down. We can't replicate that now," Ryan said, "so we're going to have more measured returns. So let's moderate our expectations."


He advised looking at alternative investments in private equity, private credit and hedge funds designed to outperform during periods of volatility or falling markets.

"This is actually a target-rich environment for places like global macro funds," Ryan said. "Overall, I would remain invested but that doesn't mean you're just static in terms of your portfolio decision-making."

Valeri of California Bank & Trust said the average decline in a severe selloff comes to 23 percent and, using the tech bubble and the Great Recession of 2008 as guides, his company calculates that a big selloff combined with a recession averages 37 percent.

"Unfortunately, investors can let emotions get the best of them and sell at the exact wrong time," Valeri said. "We never know when something could change the outlook dramatically and the markets take off. Some of the best returning days happen soon after some of the worst. So it's important to just not make emotional knee-jerk reactions and stick with your financial plan."

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