Is it time to move cash into equities?

The market has rebounded … is it poised to keep rising?

Remember when people were getting out of stocks? In the last quarter of 2008 and the first quarter of 2009, some people made the decision to move money into forms of investment with low or no stock market correlation. The recession was going full blast; the Dow was falling. But recessions are temporary, and markets improve.

The recent recovery wowed even the most jaded market analysts. From the March 9, 2009 market lows to the end of the year, the S&P 500 shot up 64.83%, the DJIA gained 59.28%, the NASDAQ 78.87% and the Russell 2000 82.19%. The CBOE VIX, the so-called fear index, dropped 56.14% in that stretch.1

Was March 9, 2009 the point of capitulation? Have you heard of that term? It references a point of “surrender” or maximum exodus from stocks to CDs and Treasuries in a bear market. The theory goes that when that point of capitulation is reached, a measured, rational market recovery will begin leading to either a cyclical bull market or (fingers crossed) a new long-term bull market.

The rebound off the March 9 lows wasn’t measured, it was phenomenal. On August 6, 2009, the head of Goldman Sachs’ investment policy committee declared that “the new bull market has begun.” On CNBC, Abby Joseph Cohen shared her belief that the S&P 500 would finish 2009 in the 1,050-1,100 range, up from a March 9 trough of 666.79. It exceeded her expectations, ending the year at 1,115.10.1,2

DALBAR, that goldmine of investment research, looked at the behavior of the average mutual fund investor over a 20-year period ending December 31, 2007. The 20-year survey found that while the broad stock market (S&P 500) returned an average of 11.82% over those 20 years, the average mutual fund investor bailed out at times, missed out on great market days, and only realized an average return of 4.48%.3 This is a really compelling argument for patience and sustained investment. In late 2008, both Warren Buffett and John Bogle made the case that investors should stay in the market, as some major values were available as a result of the downturn.4

How are you invested these days? We’ve seen a lot of change in the last few years, and many people have really changed up their portfolios. How about yours? Is your asset allocation still appropriate for your long-term objectives? You might want to talk to a qualified investor coach today to review where you are at and how you might position yourself for the years ahead.

1 cnbc.com/id/34645043 [12/31/09]
2 money.cnn.com/2009/08/06/markets/Goldman_bull_market.reut/ [8/6/09]
3 seekingalpha.com/article/102608-greed-when-others-are-fearful-is-good [10/29/08]
4 nytimes.com/2008/10/29/business/economy/29leonhardt.html?em [10/29/08]

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. This information has been prepared by Peter Montoya,Inc. for Stonecreek Wealth Advisors, Inc. An independent fee only Registered Investment Advisor firm in Salt Lake City, Utah.  Mark Lund is the author of The Effective Investor.

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Mark K. Lund is the firms founder, CEO and author of The Effective Investor, a #1 Best Seller. He has written articles for or been quoted in: The Wall Street Journal, The Salt Lake Tribune, The Enterprise Newspaper, The Utah Business Connect Magazine, US News & World Report, and Newsmax.com, just to name a few.  Mark publishes two newsletters called, “The Mark Lund Growth Report” and “Mark Lund on Money.”  Mark provides CPE (continuing professional education) courses for CPA’s.  You may also have seen him on KUTV Channel 2, or as a guest speaker at a local association or business. Mark provides investment and retirement planning services for individuals and 401(k) consulting for small businesses. In his book, The Effective Investor, Mark exposes the false narrative magazines, media, big Wall Street firms, and most advisors want you to believe. The good news is that Mark will show you that you don’t need their speculative ways of investing in order to be successful. Get a free copy when you schedule your initial consultation.

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