Here's the dilemma. As soon as individual investors start pouring into the stock market, investment strategists begin to worry about when to get out. It's an age old story on Wall Street, but so what.
By all intents and purposes 2011 is expected to be a very good year in the stock market, even if there are a few corrections along the way. The market certainly got off to a great start this week helped by investor enthusiasm and an optimistic outlook for at least some economic growth.
Plus, with every strategist worth their fee saying it's time to get out of bonds, where else is an investor supposed to go?
Now, whether you invest directly in equities or do it through a mutual fund or Exchange Traded Fund, it doesn't really matter. All that does matter is that you diversify your portfolio so you can ride the waves as money moves out of one industry sector and into another.
Abby Joseph Cohen is the senior investment strategist for Goldman Sachs' Global Markets Institute. She says that with the odds of a double-dip recession fading and assets perceived as safe, "risk assets" like stocks may be better priced than they appear.
Richard Bernstein, CEO and chief investment officer of Richard Bernstein Advisors, agrees. He says U.S. stocks "have the wind at their back right now."
Blackrock's Chief Investment Strategist Robert Doll says he expects low double-digit returns, including dividends from the stock market this year. In an interview with USA Today, Doll said, "There's nothing like a slightly better economy, a slightly better stock market to argue that confidence will beget more confidence."
Doll adds that one of the big mistakes investors are making is using the U.S. economy and U.S. stock market in the same sentence, and they're increasingly unrelated. Doll points out that companies are getting 40% of their revenue abroad and that over the next five years, 60% to 70% of the profits of the S&P 500 will come from outside the U.S.
Bernstein says individual investors have been very scared of the equity market because they hear a lot of economists talk, but there's a big difference in the way an economist looks at the world and the way an investor does. He says most people don't realize that the stock market does not move on good or bad economic numbers. It moves on better or worse.
Therefore says Bernstein, if you're an individual investor, and see there's a pretty good probability the U.S. economy will be better a year from now than it is today, you should be reasonably bullish.
