Ideas from forbes investor team
Putting the unnerving ups and downs of the market aside, in my view, the s should end the year at or near 2, 000.
It's been interesting to note that while Investors typically get more anxious over market declines, it appears that this time around they(Investors)Are just as nervous about the recent rally and whether or not it can be sustained.
Indeed, the s 500 closed at an all time high of 1, 885.52 at the beginning of the month, after a relatively flat market during the first quarter of the year.
Going from this most recent high to 2, 000 represent just over a 6% change.
I believe that the real worry investors have is the level of volatility.In short, it has not been an unvarying upward course.So, while the market measured by the s 500 up nearly 20% in the past 12 months, and is in positive territory year to date, uneasiness and investors pessimism are running high.
As i've often stated, any market move or indicator must be put into context and juxtaposed against other factors.In doing so, investors should be able to gain a clearer picture of the reasons for the volatility, the wavering between momentum and defensive stocks and the overall direction of the market.Equities, unlike ongoing geopolitical issues(Russia, china)Or recent blips tied to one company's positive earnings(Thanks citigroup)Or the pickup in retail sales last month(An economic indicator).
The overall rise of the market has occurred(And will continue to michael kors sale australia be supported)Due to five critical components:
First, contrary to what many feared, the world did not come to an end and investors realized that sell off was notably exaggerated and created enormous buying opportunities.
Second, as a result of heavy handed intrusion by the federal reserve and other central banks, supply of money(In the form of qe 1, 2, 3 and operation twist)Helped drive asset prices higher.
Third, hard assets and access to capital became relatively cheap due to the sharp decline in interest rates(Orchestrated by central banks).
Fourth, as a results of items 2 and 3, the global economy started rebounding and eventually got its feet under its ground at a mild pace, but critically without inflationary pressures to derail the impact of the growth.
Fifth, corporate earnings(Aggregate earnings of the companies within the s 500)Soared from just over $16 per share in the first quarter of 2009 to $28.24 in the fourth quarter of 2013 their previous peak of $24.06 set in the second quarter 2007.
Markets aren't just rising as a result of artificial manipulation or gimmickry as some would have you believe, which makes this important to understand.Even more importantly, while qe is coming to an end, the other factors that helped drive the market higher are still in place.Stocks are cheap or represent the extreme values they offered in 2009.However, given that central banks, including our federal reserve, have pledged to keep interest rates low for quite some time, and that the global economy continues to gain strength and that corporate earnings are expected to continue to rise, we suspect stock prices will also rise.And, even in periods when they don't, we remind investors that dividends have historically accounted for just under half of the total return of the market as a whole.
The truth michael kors australia outlet about this rally is that many like it will come more importantly market volatility should be expected to remain at the forefront.Furthermore, a short term correction as steep as 10% be anticipated as a normal course of market action.
However, over the longer term, i believe that conditions for further gains are present that the s may possibly reach 2, 000 by the end of the year that the best way to benefit from this is to have a growth oriented portfolio founded on high quality dividend paying stocks.
With so much attention on european debt and fiscal cliffs and libor scandals, many investors have overlooked an important occurrence in the stock market over the past year or so.
While small, beaten down value stocks led the market upward surge for much of the first couple years of the bull run that began in march 2009, a significant shift in leadership has occurred since then, with large growth stocks now leading the way.
So far in2012(Through aug.2), large cap growth has been the strongest performing style box category, according to Morningstar, returning nearly 15%;The closely related large cap core is second with 11.3%.The bottom three:Small cap core(4.9%), small cap growth(5.4%), and small cap value(6.1%).
Top strategist and forbes columnist kenneth fisher expects the shift to continue.Fisher says in a recent column for interactive investor that it typical for bulls to be led by small cap value at the start, and then have leadership shift to large cap growth.
That because small cap value picks are more economically sensitive and get pounded when fears crescendo at the end of bear markets;Then they bounce back strong when fears subside and the bulls start running.After the bull market's early phases, a new phase starts, where people are less myopic,"Fisher writes. "They aren't quite so fearful and start thinking a bit longer term.Those small, economically sensitive cyclical firms don't have long term growth prospects, no long term vision.But big, growth oriented firms do.Quality and growth.They have vision, deep product pipelines, quality management.That's what investors want then they move away from small value to the polar opposite large growth takes over leadership. "
Fisher says the change often takes time to play out.But once large cap growth takes over,He says, its outperformance can be huge and last for quite a while.He thinks the current bull still has a ways to run, and recommends focusing on growth stocks with market caps in the $100 billion or more range. "There aren't many stocks there to pick from;But do it,"He says. "The longer the bull market runs, the bigger you should go. "
Fisher logic excellent track record this advice well worth listening to.So i used my guru strategies(Which are each based on the approaches of such investing greats as warren buffett, benjamin graham, and fisher himself)To find some of the market most attractive high quality large cap growth plays.Many of those are better classified as value stocks, so in order to find enough large cap growth picks that my strategies like i looked for stocks with market caps of $75 billion or more.Here what i found.Continue
European stocks are down 20% from their highs this spring, almost double the decline in the standard poor's 500 index.Sure there's plenty to worry about on the other side of the atlantic, with greece on the verge of default and the threat of sovereign debt contagion spreading across the continent.
But does that really explain the wretched stock market performance of siemens, down 30% compared with 20% for an arguably more troubled and debt exposed ge?The german conglomerate gets almost half of its revenue from outside europe, including 28% from asia, australia and latin america.
"We disagree with the market's assessment of the risk,"Said audrey kaplan, portfolio manager in charge of international equity at federated investors.Solid european industrials like siemens are"Pricing in a 50% decline in earnings from where they are,"She said, which would exceed the declines in 2008.
"I've seen stocks knocked down to levels where, forget pricing in no growth, they're pricing in such dramatic declines that they will never turn around ever again,"Said david marcus with evermore global advisors. "Investors have been in such panic mode they've sold stocks indiscriminately. "