Thinking Through Falling Markets

Rob Stein of Astor Asset Management runs a separately managed account strategy with $1.25 billion and works with over 600 financial advisers. Stein has noted his clients are becoming increasingly concerned: “Everybody got mugged in 2008, so they’re walking down the street and hearing footsteps and saying ‘I’m not letting that happen to me again.’ So they’re shooting first.” Investors “used to  to feel you could hide in the alternative space, but have now realized, “Oh, you can lose money there too.” Michael McGrath, head of alternatives at Morgan Stanley Smith Barney, says that if clients are nervous advisers should discuss alternatives with their clients. China’s economic growth is well publicized but Adam Taback of Wells Fargo says “China might be growing at a 10% rate, but long-only equity funds have had a hard time capturing that.” “That’s why investors need to know how to take profits in a falling market. Traders use three primary methods: shorting, inverse ETFs and options,” says Eric Gemelli, an investment and forecasting trainer with Marke4caster.com.