04 Sep IS IT TIME TO MOVE CASH INTO EQUITIES?
The Market Has Rebounded … Is it Poised to Keep Rising?
Remember when people were getting out of stocks? In the last quarter of 2008 and the first quarter of 2009, some people made the decision to move money into forms of investment with low or no stock market correlation. The recession was going full blast; the Dow was falling. But recessions are temporary, and markets improve.
The recent recovery wowed even the most jaded market analysts. From the March 9, 2009 market lows to the end of the year, the S&P 500 shot up 64.83%, the DJIA gained 59.28%, the NASDAQ 78.87% and the Russell 2000 82.19%. The CBOE VIX, the so-called fear index, dropped 56.14% in that stretch.1
Was March 9, 2009 the point of capitulation? Have you heard of that term? It references a point of “surrender” or maximum exodus from stocks to CDs and Treasuries in a bear market. The theory goes that when that point of capitulation is reached, a measured, rational market recovery will begin leading to either a cyclical bull market or (fingers crossed) a new long-term bull market.
The rebound off the March 9 lows wasn’t measured, it was phenomenal. On August 6, 2009, the head of Goldman Sachs’ investment policy committee declared that “the new bull market has begun.” On CNBC, Abby Joseph Cohen shared her belief that the S&P 500 would finish 2009 in the 1,050-1,100 range, up from a March 9 trough of 666.79. It exceeded her expectations, ending the year at 1,115.10.1,2
Will stocks keep advancing in 2010? There’s an old phrase people like to cite: past performance is no indication of future success. The mood is certainly more optimistic and the economy seems to be improving.
Will investors be patient? Good question. In late 2008, you had people swearing off stocks. In 2009, some of those same people changed their mind and ran back to stocks. If 2010 brings a correction, will these investors ditch stocks again? History suggests that these short-term shifts may be damaging.
In late 2008, both Warren Buffett and John Bogle made the case that investors should stay in the market, as some major values were available as a result of the downturn.4
How are you invested these days? We’ve seen a lot of change in the last three years, and many people have really changed up their portfolios. How about yours? Is your asset allocation still appropriate for your long-term objectives? You might want to talk to a qualified financial advisor today to review where you are at and how you might position yourself for the years ahead.
Kevin M. Nast is a Financial Advisor and the President of NastGroup Financial in Northville, MI 48167. He may be reached at nastgroupfinancial.com or 248.347.1888. Kevin also services clients in Brighton, Livonia, Canton, Wixom, Milford and the surrounding metro Detroit area as well as 13 additional states across the US.
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
1 cnbc.com [12/31/09]
2 money.cnn.com [8/6/09]
3 seekingalpha.com [10/29/08]
4 nytimes.com [10/29/08]