Suburban investors eying Japan disaster
Escalating fears of Japan's nuclear crisis following last week's earthquakes and tsunamis have rocked the markets, and suburban investors again are in fear of losing their life savings or retirement funds.
Depending on what happens to Japan's damaged nuclear fleet, markets once again could be extremely volatile on Wednesday. But that doesn't mean another crash, so suburban investors shouldn't pull back or even bail out, experts said.
Other natural disasters, such as those in Indonesia and Haiti, as well as the 9/11 terrorist attacks here, all rocked the markets. But those were temporary hits without lasting impact on the economy, corporate earnings or long-term retirement accounts, said Thomas Rowen of Bartlett, director of institutional portfolio management with Fifth Third Bank in Chicago.
“While this has been a horrible human catastrophe, those who take the standpoint of a long-term investment goal, this should have no effect,” said Rowen.
Japan was walloped with an 8.9 earthquake late last week, and that lead to widespread destruction, death and ongoing turmoil. Japan's stock market has been plunging and concerns arose Tuesday about its banking industry. Still, experts here said Japan is only a part of the global gross domestic product and a player in certain sectors, such as technology and the auto industry. While there may be some short-term impact, the long-term continues to be viewed favorably.
Also, those with stock in nuclear power industry could take a hit in coming days, especially if Japan suffers from further radioactive exposure. Nations likely will take a stronger look at building new plants in light of what's happened in Japan.
“But that's a relatively small investment sector,” Rowen said of nuclear power.
“The nuclear situation there is still unfolding,” said Rowen. “But if you look at the Golf oil crisis, that had a bigger impact. This now will take time to play out and we won't know how severe this will be.”
Stay calm and this too shall pass, said Mark La Spisa, co-founder of Vermillion Financial Advisors Inc. in South Barrington.
“Is there reason to be concerned? Absolutely,” said La Spisa. “But we won't see a crash right now.”
Investors should look ahead at the resiliency and efficiency of the Japanese people. It's very likely that the Japanese economy will rebound as they rebuild, experts say. They will need steel, copper, chemicals, wood and other products that will ultimately help boost the market, La Spisa said.
Still, emotions run high now with market volatility, and many warned investors to take a cool look.
“Today's selling is more panic driven. Not a good environment to make decisions in,” said Diane Swonk, chief economist for Chicago-based Mesirow Financial.