A volatile and unpredictable stock market has brought renewed attention to the likelihood of the United States economic recovery. A combination of the European sovereign debt crisis, S&P’s downgrade of the U.S. credit rating to AA+ and the U.S. Congressional Budget Office’s mid-year projection of modest 2.3 percent GDP growth for 2011 are believed to be behind recent financial markets’ turbulence.
Local investors and business owners shared their analysis and reactions to the past month of market volatility with Flagstaff Business News.
“The market goes up; the market goes down,” said Gary Muder of LPL Financial in Lakeside, Arizona. “We know that the economy is slowing down a little bit. Balancing out the account and keeping a diversified portfolio is the best way to roll with this volatility. And gold is setting records – it is a hedge against inflation and high interest rates.”
Muder didn’t give much weight to the S&P’s downgrade of the U.S. credit rating in August. “We can pay our debts, there’s no problem there. S&P said they downgraded the treasuries because of bickering in Washington – people weren’t working together.” Muder also criticizes the media for exacerbating fear within the markets. “Part of all this is sensationalism by the press.”
Travis Babb of Northern Arizona’s Babb Financial Group reacted similarly to the rapid market swings. “It’s really the media that is fueling the fire,” said Babb. “We’re not going to downplay any of the effects of the market, but in the long-term, we believe markets will go up or otherwise, nobody would invest.”
Babb also emphasized the importance of balance and patience in portfolio management. “As long as you’re highly diversified, you’re okay. Over the past 20 years, data shows the average equity investor has only yielded three percent, while the S&P index has yielded nine percent – that’s because they sell at the wrong times, during these short-term collapses.”
Other economic indicators are quelling fears of a double-dip recession. The U.S. Commerce Department reported a four percent jump in orders for durable goods in July, compared to a 1.3 percent decline in June. The recent jump is due to increases in non-defense aircraft orders and an 11.5 percent rise in new vehicle orders.
Sales at Flagstaff’s Planet Nissan, Jeep and Subaru reflect this national trend. According to finance manager Justin Bemis, “As of the close of July, business for us is up and excellent. Each month we’re about 30 percent above where we were in the previous year and August started off just like last month so I can’t really say anything negative.”
Additionally, sales are expected to hold steady at Planet Nissan, Jeep and Subaru due to Northern Arizona’s need for four-wheel-drive vehicles in the winter months. “For Flagstaff, car sales are pretty steady year-round,” said Bemis. “July through October are typically the heavier months for the car business in general, but for us up here, you’ll find people buying quite a bit during winter months.”
The recent troubles on Wall Street have not reverberated on Main Street. Jon and Kate Dahl, owners of the Stanford General Store in Concho, remain confident in their newly opened business and possibilities for future success.
“It might have an effect down the road, but we just opened in January, so we haven’t been through a full annual cycle to know enough yet,” said Jon Dahl. “But we have a loyal clientele and have been doing a lot of stocking and inventory over the summer. We’ve even just invested in a new hardware section.”
Through all the market’s chaos, Dahl has found success by being resourceful and staying upbeat. “We’ll work hard day and night to make this a success. I’ve got an apron on right now because I was just back in the deli baking. It sounds funny, but that’s what it takes to keep our costs down. Everything that we’ve done has been the result of hard work, so we’re just going to keep our nose to the grindstone, have a good time and hope for the best.” FBN