U.S. Markets

Large caps a safe haven in today's stormy stock market: brokers

NEW YORK (Reuters) - Jittery retail investors who want to protect their retirement against the recent roller coaster stock market should look to large cap companies and sell stocks on big rallies, brokers said Thursday.

Keen to reassure clients still unnerved by the market downturn in August and now seeing a 6 percent year-to-date decline in the Standard & Poor’s 500, advisers and brokers are preaching safer investments and warning that volatility may continue.

“We are advising go large cap, very high quality companies with good, solid balance sheets, like the S&P 100 or the Russell Top 50,” said Mary Ann Bartels, chief investment officer of portfolio solutions for Bank of America Merrill Lynch’s Investment Management and Guidance division.

Richmond Brothers in Jackson, Michigan, sent its third “hand-holding note” to roughly 500 clients on Thursday, said David Richmond, the firm’s president.

“Are clients scared? Absolutely. This is literally their life savings,” said Richmond, who manages $350 million in assets for clients who are mostly retired or close to retiring.

Richmond said he does not anticipate another recession until 2018 or 2019. But he prepared clients now by selling into strength - when stocks repeatedly topped 52-week highs - reducing clients’ overall equity percentage by 12 percent in the last seven months.

When the inevitable recession hits, Richmond said he wants clients to hold only 30 to 35 percent of their portfolio in equities.

Broker Vincent Barbera, managing partner at the independent firm Newbridge Wealth Management outside of Philadelphia, began decreasing his clients’ equities exposure nearly a year and a half ago in favor of actively managed funds like International Value Advisers.

Barbera said he likes that the fund, managed by Charles de Vaulx, is conservative and may hold as much as 25 percent of assets in cash at times. “If there’s nothing to buy, don’t buy it,” he said.

Barbera fielded a phone call from a client Wednesday who was concerned about the market’s 6 percent decline. “I told him, ‘I’m worried about 20 percent,’” he said.

Many advisers see the market decline as a time to bargain hunt. Colorado-based independent adviser Trent Porter advises his clients to “buy the dips,” or buy stocks that have fallen like commodities and emerging markets as part of rebalancing. Porter believes these stocks hold upside potential as they did in the last five-years of post-crisis bull market.

“Stocks are like a roller coaster: when you panic and jump out is when you get hurt,” Porter said. “If you are in for the ride and expect the ups and downs you’ll be ahead in the long term.”

Reporting By Elizabeth Dilts; Editing by Andrew Hay