A weak euro, increasing labor and oil prices and Fed-induced interest rate hikes have raised concerns for many investors in recent months.
Recently, widely-held stocks, such as Intel and Kodak have been curshed by warnings that the companies would not live up to Wall Street's profit estimates. Company after company realized that it could not make estimated earnings, lowering stocks 10 to 40 percent.
Intel's stock dropped 22 percent in a single day and Nokia dropped 25 percent on Sep. 22 and Oct. 11, respectively.
While lower-than-expected sales figures across industries have signaled that the nation's economic boom may have long reached its peak, there are no signs of negative growth or recession.
In 1999's fourth quarter, the economy grew at an unheard of 8.3 percent. Estimates now point that this year's total growth will be between 3 and 4 percent.
Wall Street indexes reflect an economy that still is growing but not at the rate that made millionares in the past five years. The S&P 500 has returned an average of 28 percent over the past 5 years. Currently, the S&P is down 4 percent, the Nasdaq is down nearly 20 percent and the Dow Jones Industrial Average is down 4.8 percent.
The question on many investors' minds is just how big a problem this slowdown is and what is in store for the future.
Stock price lows in recent weeks indicate investors are succumbing to interest rate and inflationary fears and anticiapate the series of missed earnings and bad overall conditons will be far from over.
Others see therecent market slump as just a short-term slide in growth. "I don't think that the economy will stop growing," Economics Prof. Roman Cech said. "There are no signs that point to a recession."
The economic slowdown has affected the student-run McIntire Investment Institute's (MII) tech-heavy portfolio, which is down for the first time in many years. Last year it saw gains of 63 percent.
"There is no way to time the market. We don't adjust our strategy much to reflect changing market conditions, " MII president Andy Schoonover said.
The technology sector poses a special problem for investors.
"Until we see a decline in growth in the tech sector so that we can put a limit on where these stocks are going to end up and ultimately be worth, investors will continue struggling to value them," said Jason McDougall, one of MII's fund managers.
Schoonover believes technology stocks will not be correctly valued until a definite bear market.
Employing time-tested investing strategies is the best way to lessen the effects of a volatile market.
First, it is important to diversify your portfolio. Simply defined, diversification is holding many types of assets, in many different sectors of the market. If you invested all your money in tech stocks this year, you would probably be a lot worse than if you had spread your investments out over many different sectors, such as health care and communications.
"If investors do not want to burned by a slide in the market, it is really up to them to diversify their portfolio into more than one sector," McDougall said.
"While recent market trends haven't changed our strategy significantly, we are trying t odiversify more," Schoonover said in regards to the MII portfolio.
Second, investors should set their sights on long term investing, not get-rich-quick investments.
"In the end good performing companies have a stock price to match, regardless of how the market saw it along the way," McDougall said.
Previous trends show that the economy and most stocks in general grow and increase in the long run.
"The downturn is merely a correction and indicates a good time to invest in the market," MII analyst Mike Zalivehii said.
"If you believe in a company, then any devaluation in its price is a good time to buy," Schoonover said.
Finally, as more companies embark into a global marketplace, investors should be aware of international commodity and currency trends.
Euro-based businesses and companies that rely heavily on oil are likely to experience weaker earnings in the coming months. Many companies have issued earning warnings due to the horrid exchange rate of the euro that was once 1.2 to the dollar that now runs at around 0.90 to the dollar.
Cech predicts that "future developments will strongly depend on world economies, and the U.S can only benefit from the growth of other countries' economies"
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