CNNFN writes article about Bulls on parade: Stocks bounce back … for good?
Bulls on parade: Stocks bounce back … for good?
By Paul R. La Monica @lamonicabuzz
A short history of cheap money
A short history of cheap moneyIs the worst finally over for stocks after a dismal August and rocky start to
September?The Dow Jones Industrial Average shot up nearly 300 points, or
1.8%, in midday trading Tuesday after a big drop Friday following the
jobs report.Maybe investors are relieved that it’s a holiday-shortened week of
trading. Or everyone’s elated because the Pumpkin Spice Late is finally
back at Starbucks (SBUX).(#sarcasm)Whatever the reason, it was clear that the mood on Wall Street was
cheery — for a day at least.The S&P 500 and Nasdaq were each up more than 1.5% as well. And
it was a rally with many winners. Only 22 stocks in the S&P 500 were
trading lower Tuesday afternoon.5.1%
Stabilization after correction
Investing pros are hopeful that the market may have bottomed during the
nightmarish plunge on early Monday morning of August 24.Now that the major indexes have all fallen at least 10% from their
recent highs, a so-called correction, there is a sense that stocks
should stabilize,“The markets have found some sort of footing. There is money out there
still looking for a home,” said Tom Stringfellow, president and chief
investment officer of Frost Investment Advisors.But make no mistake. There will be more volatility. It is not smooth
sailing ahead for stocks.Is the Federal Reserve finally going to raise interest rates or will it
wait for some point later this year … or even punt on it until 2016?
The Fed meets next week.Will Fed rip off the proverbial Band-Aid
If it decides to hold off on a rate hike, then jittery investors will
have another few months to get themselves worked up about the first
rate hike since 2006.Some would argue that it would be better for the Fed to just rip off
the proverbial Band-Aid.“Until we get the first rate hike out of the way, there will be more
volatility. We need more clarity,” said Bo Christensen, chief analyst
with Danske Capital in Copenhagen.Lew Piantedosi, a portfolio manager with Eaton Vance, agrees.
He thinks the Fed wants to finally hike rates so it can move on. He
also argues that the Fed should have raised rates several months ago.China fears haven’t disappeared
And what’s next for China? There may be a new sense of calm for its
stock market but there are still questions about its economy. And that
is making many investors nervous.“Most of the worries prior to August were just the Fed and rate hikes.
Now, it’s much more serious. There are fears about China and global
growth,” said Mark Spellman, manager of the Alpine Equity Income Fund.Because of these concerns, Spellman said he’s focusing more on
companies that have little exposure overseas. Some of his top picks are
media giant CBS (CBS), energy company Kinder Morgan (KMI) and
credit card firm Discover (DFS).Bargains everywhere
But not everyone’s afraid. Some money managers are even salivating
about the sudden bargains.Christensen said he started “dipping his toes” back into stocks two
weeks ago after selling stocks in July in order to cash in some
profits.“This is a market of opportunities,” he said.
Piantedosi is almost ready to start shopping for more stocks as well.
“We are holding a little more cash than normal so we can pick our
spots. But it may soon be time to start nibbling so we can take
advantage of the volatility,” he said.Again, this is not to suggest that stocks are set to go on a straight
shot higher anytime soon. There probably will be several more big down
days ahead.The key is to ride them out and resist the urge to panic. Fortunately,
it seems like some investors are heeding that advice.“We haven’t had too many frantic client calls about stocks. That’s much
different than previous corrections. People are testing the waters,”
Stringfellow said. “Diehard investors are staying in the markets.”CNNMoney (New York) September 8, 2015: 12:46 PM ET
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