Just stay calm as the market rises and falls

COEUR d’ALENE — Inflation. War. Rising interest rates. Help wanted signs everywhere. Rumbling of a bear market growing louder. Economists say a recession is inevitable.

It’s a scary time — enough to send jittery investors seeking the safety of a savings account.

And for financial advisors, who handle portfolios for those investors, it’s got to be even more stressful, creating pull-your-hair out kind of anxiety.

Right?

Wrong, says Brad Dugdale, senior vice president with D.A. Davidson in Coeur d’Alene. He just marked 40 years with the company. He’s survived and thrived through decades of the ups and downs of the economy. He’s managed millions of dollars through the rise and fall of the stock market.

He does so by remaining calm.

And what’s going on now, he says, is far from the most difficult environment he has experienced in his career.

“Not even close,” he said on a sunny Wednesday morning from his fourth-floor office.

Dugdale is a picture of a man at peace. If he's worried, he doesn't show it. He smiles often. He laughs. He has a full head of white hair.

On the wall in his office are sayings:

“The only way to do great work is to love what you do.”

“A pessimist complains about the wind, the optimistic expects it to change. The leader adjusts the sails.”

Which is what Dugdale says he does and continues to do. He adjusts the sails.

He explains that when the economy is in trouble, banks are in trouble.

During the recession of 2008 and 2009, balance sheets exploded with debt. That created a liquidation cycle. Many companies, including financial institutions, closed. Unemployment was in the 10% range and people couldn't find work.

It’s different today, Dugdale said.

Banks are in “pristine shape,” well-capitalized and earning close to record profits. So are some corporations. The unemployment rate is under 4%. Job openings seem to be everywhere.

“The consumer still has opportunities to earn income,” Dugdale said.

Mind you, he’s not saying the economy isn’t ailing.

He’s not saying profits won’t shrink.

He’s not saying a recession won't happen or the stock market won't be bearish.

But he is saying there are positives that are good reasons for optimism and many people don’t know about them.

“There's a ton of innovation still going on,” he said.

Dugdale speaks of a cloud software business that “nailed their earnings.”

He tells of a man he recently met who is building a 200,000-square-foot data center in Moses Lake, Wash.

“When he's done with that one, he's going to build another one,” Dugdale said. “There’s all of this sort of stuff that's going on behind the scenes, whether it's automation, robotics, artificial intelligence, mapping of the human genome."

Self-driving taxis may not be far away, Dugdale says.

“It's hard to push this innovation back into the tube,” he said. “There's just a lot more productivity that's going on behind the scenes. So even though we've seen this value contraction, which probably makes sense because we're raising interest rates, behind the scenes these companies are still executing on their plans."

Still, many are worried about the financial stability of a country with a gross national debt of $30 trillion.

And while some have fled the market for fear of what may come, Dugdale said the vast majority of clients at D.A. Davidson have stayed the course.

It’s natural for people to worry about their money, he said.

"I can't remember a time when investors weren't worried about something," he said. "Worry seems to be the one constant that never goes away. I'm not sure why that is true, but it is."

Part of the problem, he says, is the 24/7 onslaught of news — much of it under the overused "breaking news" banner — coming at people. It has "created more chaos than most of us are used to. The proliferation of social media platforms add to the confusion.”

But he preaches calm, and as in that EF Hutton commercial from decades ago, people listen.

“Our clients haven't really reacted to this at all,” he said. “Not at all.”

He points out what financial folks know: The market rises and falls on a daily basis, but long-term, it goes up.

Dugdale notes that when he went to work with D.A. Davidson in the early '80s, the Dow Jones Industrial Average closed at 862 points. On Friday, it closed at nearly 33,000.

Fear causes people to react without thinking their actions through. In a down market, said to be close to a bear market, panic sets in.

People, Dugdale said, "are just awful at behavioral finance.”

“There's an old quote in our business that stocks are the only thing people won't buy on sale because of their emotions," he said.

Sure, the market could do lower, he said. And yes, some will get their money out.

But they usually wait too long to return.

"Most people will wait until it's back above 36,000 to actually get back in. And they'll go, ‘Things are OK again.'"

“That's one of the benefits of a 401(k) is that people are actually forced to buy when it's down. You're in the company 401(k)? Guess what? You're buying shares at a better price. And so that's a beautiful thing.”

Dugdale makes it clear he is not predicting what could happen, but he recalled that when Iraq’s leader Saddam Hussein ordered an invasion of Kuwait in 1990, energy prices spiked and the market fell some 20% in 90 days.

The U.S. eventually drove his forces back out, and the market responded again.

“The market screamed north for close to 30 days in a row, and it was almost impossible to get back in," Dugdale said.

He said, if news came out today that the conflict in Ukraine was resolved, the potential is there for a repeat.

“Because that solves a lot of energy issues. It solves a lot of supply chain issues. Am I intelligent enough to be able to predict that? No, but that possibility is there," Dugdale said.

With finances, and with life, he talks of consistency. He speaks of patience.

He practices what he preaches. He said, in all his years with D.A. Davidson, he has never adjusted his contributions to his retirement plan.

“I have not ever changed one thing in my 401(k),” he said.

Golf is a Dugdale passion. And he improves his game without leaving his office.

In a desk drawer he keeps a rubber mallet and a golf ball. Using his left arm, he bounces the ball up, and it comes down. Up and down. Over and over.

He's not wasting time. He's paying attention to details.

"If you look at a lot of those golfers, you'll see how big their forearms are. So this is a device that helps you strengthen your forearms. So if you think about it, the stronger forearms are, when you transfer your energy through, steel on steel is going to go farther than a spaghetti noodle with steel," Dugdale said. "You see what I'm saying? There's a whole process.”

Sounds similar to understanding the stock market.