Stocks stabilize after selloff: What Long Islanders need to know

U.S. stocks rallied in early trading Thursday but finished mostly flat, failing to rebound from losses the previous day after the Federal Reserve said it would cut interest rates at a slower pace next year than anticipated.

On Long Island, financial experts and locals invested in the stock market said the slide in stock prices Wednesday hadn’t motivated them to make any rash changes.

The Dow Jones Industrial Average, which tracks 30 of the largest public companies, rose 0.04% Thursday, while the S&P 500 fell 0.09% and the tech-heavy Nasdaq Composite Index declined 0.1%.

Thursday's session followed a Wednesday rout, when the Dow fell more than 1,100 points, or 2.6%, the S&P 500 fell 2.9% and the Nasdaq dropped 3.6%.

Those losses came after Fed policymakers signaled they expect only two quarter-point rate cuts next year. The Fed had projected four potential cuts next year in September.

“That means interest rates are going to be higher for longer and that spooked the market, and thus spooked the investor,” said David Frisch, CEO of Frisch Financial Group, a Melville-based investment management and financial planning firm.

The federal funds rate, which is the rate banks charge each other for overnight borrowing, affects the rate at which consumers and businesses can borrow short-term debt, such as credit cards and auto loans. When the rate is higher, it is more expensive for businesses to use debt to expand and for consumers to borrow to make purchases. 

Frisch recommended investors use the sharp move in stocks this week to take a look at how their money is invested and consider if it reflects the amount of risk they want to take in the market.

“This is a healthy reminder investors need to continue doing their homework and monitoring their portfolio,” Frisch said.

Investors should remember the S&P 500 was up as much as 30% at one point this year, said Josh Brown, CEO of Ritholtz Wealth Management in Manhattan and a South Merrick resident. The index ended Thursday up 23% year-to-date. Brown attributed Wednesday's losses to a lack of volatility earlier in the year, which created a sense of complacency among investors.

"Into that mix of people being very calm and complacent, the Federal Reserve threw a monkey wrench,” he said. 

Brown said his firm, which manages money for more than 4,000 households, doesn’t make material changes based on one Fed announcement because the Fed often changes its tune as more economic data becomes available.

“I don’t think people should treat their retirement account as a vehicle to bet on interest rates,” he said.

He also emphasized the importance of keeping a high allocation of stocks in a portfolio to guard against rising living expenses.

“If you learned anything from the last two years, it should be that the real risk is running out of money to support the lifestyle you want to have,” he said.

'In it for the long term'

 On the Long Beach boardwalk Thursday, locals exercising or enjoying the ocean view seemed unfazed by recent market fluctuations.

“I’m in it for the long term,” said Jason Campbell, 35, an accountant from Merrick. “I don’t let the daily closes [of the markets] affect where I invest my money. I prefer to look at how the markets have done in the past year or two or five years.”

Hillary Schwartz, a retired postal worker from Long Beach, agreed.

“There’s always a lot of nervousness on Wall Street when you get a new president coming in," she said. "Things will calm down after Inauguration Day. I don’t think this is the time to make any moves in terms of where you put your money.”

Long Islanders shouldn’t lose sight of the strength of the U.S. economy in 2024, said John A. Rizzo, an economist and Stony Brook University professor.

The U.S. economy grew at a 3.1% annualized rate in the third quarter, according to revised data released Thursday by the Commerce Department. An earlier release had reported the economy growing at a 2.8% annualized rate during the July-to-September period.

“The overall economy remains strong, and I look for the stock market to recover from the selloff in the coming weeks,” Rizzo said. “And we must remember that, despite the recent selloff, the stock market has been quite strong in 2024 overall.”