By Quentin Fottrell
The Dow closed at its highest level in nearly four years on Thursday — just a day after posting its worse loss of 2012 – leaving many pros worried that last year’s roller-coaster ride is far from over.
Stocks jumped more than 120 points today on strong jobs and housing data. On Wednesday, the Dow plunged 90 points on renewed fears over Greece’s debt. And experts say there may be more such whipsawing ahead. “We’re not out of the woods yet,” says Larry Rosenthal, president of Financial Planning Services in Manassas, Northern Virginia, “We’ve got a long way to go.”
However, few analysts expect the extreme market volatility of last summer to return unless Europe experiences a dramatic stumbling block. Today is just the fourth move of more than 1% in the S&P 500 this year. Last year, by comparison, there were just over four such swings a month. And, while fears of continued shakiness rose this month with a 20-point jump on the Chicago Board Options Exchange Market Volatility Index, or “fear index,” it’s still waty down from a high of 80 points last August.
In the meantime, some advisers are recommending their clients cutting back on risk assets — even in this more stable environment. Rosenthal suggests dumping growth stocks in favor of value exchange-traded funds – mutual funds that track various stock market indexes.
Other advisers are going even more defensive. Wade Westhoff, a financial adviser based in Danville, Calif., is recommending that clients buy managed futures funds, which tend to perform well when volatility picks up. He also says long/short equity and hedged-equity strategies can help dampen volatility in a stock portfolio.