Hang in there Softball Daddy,
Wednesday's stock market dive would make anyone want to hit the panic button.
But it's important to understand why the markets have been swinging wildly in recent days — and what you should be doing to safeguard your nest egg.
We asked the experts to weigh in:
Q. Why are we seeing huge gyrations on a daily basis?
A. The markets are reacting to news in a very strong way because of all the uncertainty in the world.
"There is a lot of tension out there," said Uri Landesman, president of Platinum Partners, a New York hedge fund. "The world is highly charged right now."
Fear of a global economic slowdown and debt defaults in Europe has traders pulling the trigger when they see a negative headline.
"It's a 'sell first, ask later' mentality," said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.
Q. Why is what's happening in Europe impacting our stock markets?
A. Think of the global economy as an enormous web. U.S. banks hold European debt. As the European debt crisis grows, that could significantly impact our banks and the overall U.S. economy.
Q. Should we expect these kinds of wild ups and downs to continue?
A. Absolutely. "Until the uncertainty is lifted, volatility is here to stay," Detrick said.
Q. How do recent stock market gyrations compare with 2008?
A. So far, they pale in comparison.
From October through the end of 2008, there were 21 days of plus or minus around 4% moves on the Dow, said Jeffrey Hirsch, editor of the Stock Trader's Almanac.
"There was a lot more red then, than there is right now," he added.
Q. How does today's financial turmoil compare with the financial meltdown of 2008?
A. "The situation was much worse in 2008," Landesman said. "You had major financial institutions failing."
And unlike 2008, U.S. companies today are rich with cash on their balance sheets and banks are not holding nearly as much risky, highly-leveraged investments, Detrick said.
Q. What are the chances we are heading into another recession?
A. The chances of the country falling back into a recession are one in four, according to Reuters' monthly survey of 70 economists.
Q. What should I be doing to safeguard my 401(k)?
A. The key is to stay diversified, with a mix of stocks, bonds and cash. Don't bail out of stocks. Take a look first at when you will be needing your money.
"If your time horizon is at least five years, then you should have about 20% to 50% of your allocation in stocks," said Charles Failla of Sovereign Financial.
"If your horizon is less then five years and your exposure to stocks is greater than 50%, you will want to consider reducing your risk and exposure to stocks."
pfurman@nydailynews.com
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