Since the beginning of the year it’s been a wild and mostly uncomfortable ride on Wall Street, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq all trending downward.

Many Garden State residents with 401(k)s are understandably concerned but financial experts are advising you to not push the panic button.

According to Ken Kamen, president of Mercadien Asset Management in New Jersey, what we’re seeing is the most expected downturn we probably have seen in a decade.

“It’s really being driven in large part by the Fed getting ready to start raising interest rates, which everyone knew they were going to be doing, it was just a question of when they were going to start doing it,” he said.

“This has been very much telegraphed but when it starts to happen people get a bit freaked out and we’re starting to see the market try to get ahead of that.”

He noted the way the Federal Reserve fights inflation, which has really been heating up lately to a large degree because of the supply chain disruption crisis, COVID-related spending on products and the labor shortage, is to raise interest rates.

Riding momentum

He said since the pandemic began there has been an increased interest in companies that showed promise and potential, but now that’s started shifting.

“We’re seeing a huge correction in basically companies that have great stories but no earnings, a lot of people were riding momentum over the last couple of years and they were in things not knowing why they were owning it but because it was going up they were buying more,” he said.

Change is in the wind

Kamen said a lot of money now "is cycling into what I call the stocks your grandparents would have owned, the companies that have solid earnings, solid balance sheets.”

NEW YORK, NY - JULY 27: American flags are displayed outside the New York Stock Exchange (NYSE) during the evening of July 27, 2016 in New York City. The dollar fell Wednesday as the U.S. Federal Reserve's latest policy statement caused investors to reassess expectations for interest rate increases in the coming months. (Photo by Kena Betancur/Getty Images)
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He said with interest rates set to start rising soon, “companies that have big stories and no earnings trading a huge multiples are being punished, as people run for more solid fundamentals.”

Don’t panic

"Now is the time to reevaluate and make sure that your investment is really being made in companies that you really want to own, not stories that are really going by momentum," he said.

He said it’s important for all investors to remember markets go up and down.

“Bear markets are periods in time where people who think this time is different sell all their assets to the people that know this time is never different,” Kamen said.

“Don’t panic now, if you have the right allocation in the right time frame the market is actually putting a lot of things on sale for you and you should probably be thinking more about what you want to purchase than what you want to sell.”

You can contact reporter David Matthau at David.Matthau@townsquaremedia.com.

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