Estimated reading time: 3 minutes, 11 seconds

How to Calm Jittery Investors

It’s been a tough five weeks for equity investors. After hitting all time highs on March 7, many broad market indices declined in highly volatile trading, with stocks of many high-growth companies—especially those in the biotech and Internet sector—declining 16% or more.

Some market pundits maintain that the volatility is part of an overdue correction as equity valuations simply aren’t sustainable. They point to sluggish U.S. growth while explaining that moderating growth in China may cause global economic expansion to slow. At the same time, fears over the impact of sanctions to punish Russia for annexing Crimea are also worrisome.

At such times, advisors are likely to get panicky calls from anxious clients who remember 2008-09 all too well and are concerned that equities will continue to decline.

With that in mind, it’s important for advisors to provide a balanced but assuring approach when answering questions. It’s common, of course, for advisors to point out that equity markets, while historically having provided the strongest returns, are likely to experience declines that long-term investors should ride out.

Advisors should also stress that while declines can be scary, there are plenty of reasons for optimism regarding the U.S. economy and corporation earnings.

U.S. Manufacturing: The U.S. is experiencing a strong manufacturing renaissance. In some cases, companies are moving jobs from overseas locations to the U.S.

Apple, for example, is now building certain computers in the U.S. Honda’s U.S. operation, meanwhile, has become a net exporter of cars. The trend is likely to continue as many foreign countries have burdensome labor regulations, resulting in an increase in labor costs. Manufacturing in the U.S. is also getting a boost from cheap natural gas and oil, thanks to fracking, horizontal drilling and other technologies.

Energy Industry: The U.S. energy industry is growing quickly and adding jobs as fracking and horizontal drilling unlocks natural gas and oil that has previously been off limits. Drilling and well operations in states such as Texas, Colorado and North Dakota is increasing demand for housing, restaurants, and other types of business needed to support a growing influx of workers.

Employment Market: it was the first time since the subprime mortgage crisis that private enterprises had employed as many workers as before the Great Recession.

Now, some economists say that employment by states and local governments is showing signs of improving. As the job market expands, consumer sentiment—and spending—is also expected to improve.

Severe Winter Weather is Over: s likely that at least some of the economic sluggishness in January, February and early March was a result of severe winter weather that prevented people from shopping for cars, homes, appliances and other durable goods. Having been holed up during the winter months, consumers may have pent up demand for shopping and may open their pocketbooks and wallets now that the severe weather is over.

Euro Zone Stabilization: While the Euro Zone still has issues to work out, it is no longer on the brink of collapse. Indeed, yields on Spanish bonds have dropped to rates that are lower than U.S. Treasuries.

Low Inflation: Even with improvements in the employment market, labor costs and capacity with manufacturing facilities are both supportive of maintaining low inflation, which, of course, is a tailwind for American businesses and for economic growth.

No one, of course, can predict the future with utmost accuracy and certainty. Yet, during market declines such as the decline following the March 7 record highs, being able to calm investors by pointing to positive developments with the U.S. economy can go a long way to strengthening relationships with clients. After all, economic expansion provides increased opportunities for business to grow their earnings and over the long haul, earnings growth supports equity markets

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