MarketWatch: David Sadkin was featured in the article, “Here’s the advice one top L.A. wealth manager is giving his high-net-worth clients ahead of the election.”
“Here’s the advice one top L.A. wealth manager is giving his high-net-worth clients ahead of the election,” by Barbara Kollmeyer, MarketWatch.
As Election Day has drawn near, it’s no surprise that investors have grown anxious about what the outcome might do to their nest eggs — and the high-net-worth crowd is right there with them.
At the campaign’s tail end, as polling numbers drew tight between Democratic candidate Hillary Clinton and Republican rival Donald Trump, stock markets began displaying signs of nervousness. The S&P 500 SPX, +2.22% logged a nine-day losing streak, the longest string of losses in more than 30 years, which only ended Monday as equities rebounded in the wake of the FBI decision not to bring charges against Clinton in connection with her email practices while secretary of state.
David Sadkin, senior vice president at Bel Air Investment Advisors, is telling his clients — some of whom work in showbiz — to take it easy. “Some clients are concerned about an election surprise having a negative impact on the markets,” said the Los Angeles–based Sadkin, whose firm had $6.5 billion under management as of the end of the third quarter. “If this occurs, any reaction is likely to be short-term and a buying opportunity.”
“I don’t recommend making long-term investment decisions based on the election,” Sadkin told MarketWatch in follow-up comments to an interview in early October.
Sadkin’s clients are also worried about the timing of an interest-rate hike from the Federal Reserve right now, putting them very much in the same boat as many other retail investors. His advice: Use selloffs to pick up choice assets and have reasonable expectations for return.
“These fears notwithstanding, our base case is for slow economic growth and modest returns on equities,” said Sadkin.
U.S. stocks have been meandering along in a tough election year, and the S&P 500 index is up about 3.6% on a year-to-date basis. Better bets have been made in crude oil and gold, each up 20% with just under two months to go in the year.
Sadkin said he expects 2% to 2.5% growth for the U.S. next year and stock-market returns in the mid to high single digits. He remains a fan of U.S. banks, he said, which should get a boost from higher interest rates, though he’s cautious on bonds, especially longer bonds that are more interest-rate-sensitive. Banks are barely keeping up with the broader indexes: The SPDR Financial Select Sector XLF, +0.20% is up close in 2016.
While jittery markets will get average investors nervous, Sadkin said volatility isn’t the big risk for his clients, who are more concerned about “permanent impairment of their capital.”
“If they don’t sell out of fear,” he said, “they will likely see that the paper losses are temporary and [that] their account values will come back over time.”
He continued: “Our clients have typically had some sort of liquidity event, and may not have the opportunity to make the money again, so they place great emphasis on wealth preservation and have a higher allocation to fixed income. For our clients, the fear of losing principal outweighs missing out on potential gains.”
Sadkin said the advice he gives his clients applies to all investors: “Slow and steady, boring investments will get you to where you want to be,” he said. “Don’t try to hit a home run. Continue to save, stick to your asset allocation, and let compounding do its magic. That’s the best way to build your retirement.”
In other words, investors should resist the urges to buy when markets are moving up and they feel upbeat and to sell when they’re scared or when markets are falling. Investors with a long-term outlook, said Sadkin, “need to keep in mind that over the long term, quality stocks outperform the bond market. They should remain focused on the long term and [not] let short-term volatility scare them out of that allocation.”
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