Bottom's up: After new market highs, advisers proceed with caution

Stocks are at their highest levels of the year right now, but advisers aren't completely sold that the run can continue

Jul 31, 2009 @ 3:04 pm

By Sue Asci

With major equity indexes soaring past their high-water mark for 2009, advisers now seem to agree that the markets have hit their bottom. How long they will continue in positive territory, however, is up for speculation.

“I think the recession is over,” said Jim Lowell, chief investment officer at Adviser Investments Inc. of Newton, Mass., which has $1 billion in assets under management. “But the days of a fast and easy rebound of money are also over.”

The Dow Jones Industrial Average has spiked ahead of its previous 2009 high level, which was a 9,034.69 close on January 2.

The blue chip index closed at 9,214.84 yesterday.

“My guess is you'll see a pullback and then there will be growth from there,” said Gordon Bernhardt, president of Bernhardt Wealth Management Inc. of McLean, Va., which has $105 million in assets under management.

“Clearly there are a lot of issues in the marketplace, including unemployment and concerns about the future.”

From now until third-quarter earnings start to appear in October, the markets may see some additional lows, Mr. Bernhardt and other advisers noted.

“I would wait for a better buying opportunity which I think will come between now and October,” Mr. Lowell said. “By then we'll have the earnings and forecasts and a much better feel for whether the cure for the patient is actually curing the patient.”

“We are entering into a humdrum period and there is no catalyst that I can see to drive things dramatically higher,” he added. “But we have climbed so far since mid-March and we probably will not fall back to those levels.”

Many investors and some advisers are probably still skittish about getting back into market because of the recent bullish conditions, he added.

The Dow Jones is now up 40% since the low points of March 9, while the S&P 500 Index has climbed roughly 46% over the same period.

If investors aren't willing to jump back into the markets, now may be a good time for to reconsider their appetite for risk, said Dan Traub, president of Tempo Financial Advisors LLC of Natick, Mass., which has $22 million in assets under management.

“I think it's the best time to evaluate your risk tolerance — coming off of a decline — because you get a much clearer picture of the kind of risk you can take,” Mr. Traub said.

“Life circumstances and risk tolerance should guide your investment principles and not market fluctuations.”


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