After graduating with her MBA from Ohio State University in 1974, Maris Ogg worked in the fast-paced world of trading before moving to the analytical side at a bank trust company.
Now as president and founding principal of her own financial advisory firm, Tower Bridge Advisors, she has a lesson to teach her clients: Watch and wait.
This approach may sound conservative when compared to her roots on the trading desk. But Ogg learned a lot during those years, and she walked away with a belief that what matters most is that her advisory clients can relax.
"The economy is just starting to transition from being stimulated by the government to being self-sustaining," Ogg said in an interview last Tuesday, and gains are coming in fits and starts.
Indeed, the recent correction brought the market back into undervalued territory, which, she says, is healthier.
"I think the market got ahead of itself; expectations got ahead of themselves," she said. "We would expect that the recovery would continue, but I think people's expectations got a little high for where we were in the cycle and the issues we are still facing," such as high unemployment and weak home sales.
This spring's stock market downturn spooked investors, and financial advisers are finding themselves doing a lot more hand-holding. "The decline of 2008 is still fresh in investors' minds," so they may sell stocks that advisers think they should hold because they get scared, she said.
"My philosophy is that you have to be able to sleep at night. You have to get clients to the point they can be comfortable with their asset mix. This is a period in which it takes some work on the part of advisers to help clients work through what they're facing," she said.
Counseling skills are crucial, she said. Advisers must call their clients to calm their fears. "It's a good time to talk things through," she said.
The bullish news is that the stock market correction brought equities back to an undervalued level, leaving room for another year or two of earnings gains, Ogg said. And companies are in great shape.
Ogg said she does not believe the chaos in South Korea or Israel will have long-term effects on global markets but the level of debt in the United States and abroad concerns her. "In the long run, valuations will be impacted by the level of debt every country is dealing with, including the U.S.," she said.
Ogg said she foresees inflation as well as slower growth in the next five years as the government starts printing money to pay down its debt with cheaper dollars. The result: Those who retire in the next five years will get hit hard by inflation. Rising commodity prices are a warning sign, she said. "That is really hard for those living on a fixed income," she said.
She expects a turning point in the next 12 months as yields rise, making the equity market more attractive, Ogg said. "The difficulty right now is that interest rates are so low that people are trying to invest to make income, so they are investing down in quality or toward equities, and they get pushed towards taking more risks because the near-term returns of money market funds are so meager," she said. "All of these strategies add more risk to portfolios."
This leaves a lot on advisers' plates right now. "The old buy-and-hold probably won't work this time," Ogg said.