Dow hits record high: what the experts are saying

Published 06 March 2013 03:07, Updated 06 March 2013 07:17

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Dow hits record high: what the experts are saying

“For the average investor, this could mean things have turned around, even though we had a lot negative news like the ‘fiscal cliff.’ If you believe the stock market is a leading indicator of the economy by six to nine months, there could be stronger US economy coming later this year,” Schaeffer’s Investment Research senior technical strategist Ryan Detrick says. Photo: Greg Newington

The Dow Jones Industrial Average has pushed past a record high last hit in 2007 as investors continued a rally that has boosted the index by more than 8 per cent so far in 2013.

Hopes that China’s leaders are moving to bolster the powerhouse nation’s economy and positive data out of the US have also buoyed the Dow, which broke through the previous intraday record of 14,198.10 that was set on October 11, 2007.

Ted Weisberg, floor trader, Seaport Securities in New York

"I think it simply reflects investor sentiment that is clearly, for psychological reasons, being reinforced by this continued positive stock market we've enjoyed since December.

"In some respects we haven't made a lot of progress. If you go back to 2000, we've sort of been running in place for almost 13 years.

"It's hard to know what catalyst is in fact driving the market. Certainly Fed monetary policies have something to do with it. Certainly corporate earnings have a lot to do with it.

David Kelly, managing director and chief market strategist, JP Morgan Asset Management, New York

"Things that could really have gone wrong like a blowup in Europe or a fiscal cliff in the United States or a crash landing in China created an extreme disparity between stocks and bonds and cash. Stocks are close to fair value, but very cheap relative to the bond market and to cash which is very expensive. Central banks have been keeping rates low and that justified higher stock prices. But we weren't seeing that because of these risks. As these risks have diminished, money is going into stocks because it has nowhere else to go. That led to the new high on the Dow Jones Industrial Average today.”

"It's not that the global economy is doing great or that the US economy is doing great, but the risk of catastrophe is lower. Not only is it lower, but it feels as if it's lower.

"After 2008, everyone was waiting for the next shoe to drop. You don't hear that so much now. The passage of time alone is diminishing the fears that have kept markets at such extremes. That is pushing money away from fixed income and away from cash, to equities.

"The central banks are making it impossible for fixed-income investors to make a good return. That means investors have to be overweight equities and they are moving toward that. That is helping the market move up."

Stephen Wood, chief market strategist at Russell Investments in New York, with about $US180 billion in assets under management

"It has been a long, grinding recovery, but the private economy is holding its own in the face of very challenging policy and political risks. Over the past few quarters, markets have been pricing through volatility.

“There is a lot of momentum and rotation going into equities from cash and bonds, and right now sentiment seems to have the upper hand over fundamentals, which haven't changed dramatically. It will still be volatile from here, and we're expecting high-single digit returns for US equities on the year, but it looks like China is making a commitment to stimulus and Europe realises it has very serious issues. That's all positive."

Charles Nenner, president of the Charles Nenner Research Center, Amsterdam, The Netherlands

"We're selling everything around here. I think we're forming a top, it doesn't mean it's going to turn around immediately, but it's too risky for me.

"All the people who missed the whole rally are pouring into the market now, and the people who started buying at the low of 2009 are selling."

Alan Gayle, senior investment strategist at Ridgeworth Investments, Richmond, Virginia

"I think that the stock market is riding the wave of global monetary stimulus. This is a market that wanted to test the old highs, but it is stretched. It's reaching out on a limb for that last piece of fruit. This stance is somewhat vulnerable.

"We're still going to have to digest some of the spending cuts that have gone in and the tax increases."

Jack Ablin, chief investment officer, BMO Private Bank, Chicago

"The Dow gets the headlines. I think there is a fair amount of Americans who remain skeptical about stocks. With the Dow hitting a record, they could perhaps encourage them to get out of the wading pool into the deep end. Given the valuation differential between stocks and bonds, the market will trade higher. As individuals get tired of measly yields, they could move into the market.

"For me, we are at fair value. The upside of the market is limited by the Fed. If the market rallies another 10 per cent, we could see stirring at the Fed. They will have to address of what potentially another bubble."

Ryan Detrick, senior technical strategist, Schaeffer's Investment Research, Cincinnati

"For the average investor, this could mean things have turned around, even though we had a lot negative news like the 'fiscal cliff.' If you believe the stock market is a leading indicator of the economy by six to nine months, there could be stronger US economy coming later this year.

"People had sold equities earlier and missed out on a chunk of this rally. This makes those who held on to their stocks feel better.”

Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey

"This is a classic bull market, climbing the wall of worry. Valuations in the equity market are spectacular. Meanwhile, positioning in some segments of the investor community, particularly retail, are light, while cash balances are extraordinarily high among retail investors.

"We are seeing the 'great migration.' But it's not the great migration people expected. There's a fear out there that a wave of money will move out of bonds into stocks. But the money will not come from bonds. It will come from cash, the most expensive asset.”

Anthony Conroy, head trader at BNY Convergex, an affiliate of The Bank of New York

"The numbers are real. The market's moving. You have billions of dollars changing hands day-in and day-out.

"You don't fight the Fed, and it seems to be fairly consistent with what's going on. We have a pretty strong market, the economy seems to be taking advantage of a low interest rate environment.

"What happens when this QE3 kind of evaporates or goes away, that's the major question in the back of my mind. But right now, the economy, the market, everything looks fairly healthy. Stocks still look fairly inexpensive."

Read the full story at The Australian Financial Review.

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