Market Update

Market Update

The market dropped to an all-time low seven years ago thanks to a fiasco with interest rates, leaving it nowhere to go but up. And up it has gone, gaining highs over the past five and a half years that rival the formidable Bull Market of the 1990s. But the strong upswing has some people scared to jump into the ring, fearing a bursting bubble. A Wells Fargo/Gallup Poll from January showed that half of Americans were wary of investing in a rising market, but another poll from July showed that most investors aren’t even aware that the market is still rising. As always, sorting out fact from fiction is really the best investment anyone can make when it comes to discussing the current rise and whether or not the time is right to buy in.

“Right now the Federal Reserve is committed to keeping interest rates low,” explains Gabriel Wisdom, managing director of American Money Management in Rancho Santa Fe. “When inflation is three or more percent you lose money by leaving it in a savings account or money market. So by their actions, the Federal Reserve is encouraging people to become investors, who would otherwise stay in bonds and play it safe.”

Wisdom says the market will always ebb and flow, but that investors shouldn’t be scared, rather pragmatic. “There’s always a Bull Market somewhere,” he explains.  “Look at any cycle. When everything else is high, different areas remain cheap and out of favor. Patient investors can go into opportunities on sale now and wait for the cycle to shift.”

“The rules don’t change,” adds Robert Inbody, managing director of Morgan Stanley Wealth Management in La Jolla. “When you emerge from a scary economic period (2008 certainly qualifies) there is a fear that each drop will result in another calamity. This ‘investor scar tissue’ can take a number of years to heal. Think of the number of traumatic situations over the last five years that were thought to be another ‘market top’ only for the market to continue its march upward. Investors should focus on the timeframe specific to their portfolio goals and not get overly concerned with every headline event.”

Others in the trenches are a bit more circumspect. “The most dangerous thing I have noticed in a market that is as strong as the one we have had, is when no one is worried,” says Steven Gee, a San Diego-based independent trader who makes his living trading short-term stocks. “When people blindly invest you have too many people putting money into the market and inflating prices to unreasonable levels.”

Gee bases his prognosis on the geopolitical climate, and suggests that this Bull Market may have less steam left than some think, but that it’s not necessarily a bad thing. “The market will continue to rise in the short term, but whether that can be measured in weeks, or months, or even a year is uncertain. No market runs straight up forever. But a pull back is healthy for markets and allows new money to flow in.”   RYAN THOMAS