By Jonnelle Marte
Stocks leapt this morning following the central banks’ moves to shore up the global economy, but advisers say the news is unlikely to kick start an end-of-year rally.
- iStockPhoto
The market’s mood tends to brighten in December in what’s often referred to as the “Santa Claus” effect. In fact, stocks have risen in the fourth quarter nearly four out of five times since 1945, according to Standard & Poor’s Capital IQ. And over that same time period, the S&P 500 index has gained an average 7.2% in the fourth quarter, following an average 10% drop in the third quarter—similar to what we saw this year.
Many pros are staying defensive in the last weeks of the year, having already cut back on equities earlier in the year. For example, Marilyn Plum, a financial adviser in Lafayette, Calif., moved about 5% of her clients’ portfolios out of equities and into alternatives like commodities and real estate. “The foreign markets are daily drama and the U.S. markets are too,” says Plum. “There’s no consistent good news.”
Indeed, advisers remain skeptical the optimism can last through the rest of the year — or even the rest of this week. “It may come up to the last day of the year to see if we’re positive or not,” says David Moore, chief investment officer with Gibraltar Private Bank & Trust in Coral Gables, Fla.
To be sure, some advisers say the turbulence has made stocks cheap, creating opportunities for brave investors who want to buy on market dips. Moore prefers dividend-paying stocks because they provide consistent cash flow throughout the volatility. He is holding more cash to be ready to increase stock exposure for some clients after markets sink.
Other advisers are telling investors to tune out the daily swings. Frank Armstrong, president and founder of Investor Solutions, an advisory firm based in Miami, says the central banks’ program isn’t enough to resolve the debt crisis in Europe, which is likely to weigh down markets again before year-end. “It’s a band-aid,” says Armstrong, who is encouraging clients to avoid moves based off of the daily news. “Investors have to gut it out and keep their eyes on the long-term horizon.”
Hold what you have until the sun begins to shine on the financial world.
bogus….
WHERE ARE: FACTS, TRUTH, INTEGRITY, ACCOUNTABILITY & JUSTICE? Do believe charges for treason come first…all this crap!
Oh Baloney! Just used History to predict..
The 1st qtr of the S&P is the WORSE qtr, historically…
Predict that and you will be more Right than wrong
Do what Wall Street DOESN’T want you to do, Go Use nothing but BALANCED Mutal Funds to Do your Investing.. It’s just like Hiring a FA , but Cheaper.. Or just like hiring a Pro to Help do your Gambling at Vegas..
You may not Make More $, but you Will LOOSE LESS!
Ave Bal Fund has done 15% past 3 yrs, 6% past 5 yrs and 10% past 10 yrs.
Since Facebook isn’t allowed here’s the thought would 125 dollars be worth sharing to the world… Facebook has another issue or shares / retains too much that a WSJ or Money investigation team fines out and it’s out on the press… It will be another Shift Happens dot com gone bye bye. EU already biting at their heels and while they can say FTC will be a precedent for next 20 years with biannual checks (every 2 years) of which they should pay than having the government pay as their fine or “compliance”. We all know what happened to Microsoft and their issues and follow on market tripping…so is your information worth 125 dollars in stock to someone else???
This is what happens when you get people that used to work on Wall Street in charge of the banks… The market reply on the 23rd would have been much worse had they not counted on the Christmas / End of the year bounce. The bounce is a market analogy of everyone putting their bonuses or end of the year market contributions in… Market usually looks out 6 months in advance though very hard for analysis with larger than average input coming into the stock market at this time frame. This is only a bump as if you haven’t read the rest of market’s news today there is more liquidity…hence more food inflation and future pricing upticks. Educated investers would have averaged out over the year on pricing yet variables of money managers and brokers timing market when Government puts in their monthly funds have a great impact over the long term investor than a Christmas bounce…look at August downturn as a lesson in fund bounces.