BOSTON (TheStreet) -- There's nowhere for investors to hide.The fourth-quarter kickoff yesterday saw the S&P 500 Index slip below 1,100 to a one-year low, while oil and commodities extended their declines in a sign global economies may be headed toward a recession. And in the third quarter, which ended Friday, 45 of 46 countries' stock indices posted declines, and U.S. stocks had their worst quarter in three years. More importantly, many of the issues that prompted those miserable performances remain unresolved, which bodes poorly for the stock market for the rest of the year.
"We don't know what will happen in 2012," a presidential election year, while Congress has yet to pass a budget and is balking at funding President Obama's proposed $447 billion stimulus plan, he said. "As a result, people are looking for a place to hide, rather than looking for opportunity," said Webman, a former mutual fund manager, in an interview. "We've seen this before. It's not just disenchantment with a segment of the stock market or a cycle, but the idea that you won't be well-rewarded for investing in equities." Unlike other economic crises 20 or 30 years ago, "everything is connected" now, Silverblatt said, noting that about 14% of the sales of S&P 500 companies come from Europe. Silverblatt said there is no market sector, even commodities, that's not suffering. "There aren't many places to hide," he said. "Some folks are saying that this is a buying opportunity, but that's a lot to swallow." An alternative may be stocks with high dividend yields, but only for those with an investing horizon of "years, if not decades." One of the gravest concerns is that investors have had it with stocks and won't return to the market even when the current crises are resolved, Silverblatt said. Webman said investors ought to look past the dire news that seems to change perspectives daily. "It makes people think they need to do something and they don't necessarily have to," he said. A focus on investment fundamentals, such as steady cash flow and growing dividends, will eventually pay off for long-term investors, Webman said. Treasuries, which have rallied this year, should be off-limits, Webman said. "My view is that it's risky to hold a large portion (of your portfolio) in U.S. Treasuries right now," given their paltry returns and the prospect of more of the same.
Peter Tuz, president and portfolio manager at Chase Investment Counsel of Charlottesville, Va., which manages $1.5 billion in assets with a big exposure to equities, said his firm has been moving into defensive stocks. Those include consumer staples in the retail industry, and that strategy is likely to continue until the economy shows signs of stability, he said. "Consumers didn't stop spending in the third quarter, at least as much as many investors thought, but they have been trading down," Tuz said. He cited discount retailers such as Costco Wholesale ( COST), Dollar Tree Stores ( DLTR), Ross Stores ( ROST) and TJX Cos. ( TJX) as displaying potential.
Readers Also Like: