Ed Butowsky, managing director at Chapwood Capital Investment Management LLC, joins Rick Bensignor, managing director and chief market strategist at Dahlman Rose & Co., and Antione Drean, founder of Triago SA, on Taking Stock’s Think Tank panel to talk about the outlook for US stocks.
While equities in the market have been on the rise recently, sending the Dow Jones Industrial Average above 12,000 for the first time since June 2008, analysts are scratching their head as to the true driving forces around these activities. Is it truly stock trading or outside forces? According to the Taking Stock Think Tank there seems to be outside forces causing the equity market to rise.
Is it possible that the stock market has reached an inflection point? Rick Bensignor comments now that we have hit 12,000 on the Dow and almost at 1,300 on the S&P people may use these big numbers as psychological inflection point. Despite the opportunities for the S&P to sell off, it doesn’t and it comes back every day, and in the market place its a little unknown what other forces may be at work here. Ed adds that while there may be outside drivers that cannot be determined, there is certainly market driven activities that are causing the market to show signs of a positive climb. These include such things as quantitative easing by the Fed, more money going into the economy, bond yields are so low, and the only way to build solid efficient portfolios is to build them to include equities. In addition, the beginning of the year is typically when everyone starts to open the 401k belt and allow money to flow back into their accounts. Ed believes that the Dow average is heading upwards in the positive direction and could top 14,000, answering the question, “could the Dow average hit over 14,000”.
As analysts question what forces are at work with the market, it prudent to be cautious with putting in more money into the market. Rick does not believe so; however, investors need to be cautious at what they are investing in. Ed comments that its relatively difficult these days to identify investments that are not highly correlated (ones that go up together and down together), so there is a resurgence of money being invested in alternative vehicles, private equity, and hedge funds. This will help in building a an efficient portfolio for the long run.
Furthermore, Ed believes that stock prices will go higher in light of where the market was in relation to the liquidity crisis and recession. There may have been some gaps recently but when you look at the track record in a relativistic manner its doing better and will cause stock prices to go higher. In addition to this market being a more global economic market this will certainly help the stock prices of various exchanges go up, whether in Europe, far East or even in the US. Antoine Drean adds that private equity is certainly back in the cross hairs of investors, which has caused the prices to come back too. Antoine explains that even though we are a global economy and many business are established globally money seems to be flowing heavily into emerging markets, but fears that because everyone is trying to do the same type of investments that that may not be the best in the long run.
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.