Stock market rally is more than a big number

Even with the Dow heading toward another milestone, Astor Investment Management's Rob Stein says the stock market is virtually in set-it and forget-it mode. In this Take Five interview, he explains why.
JUL 03, 2014
Even with the Dow Jones Industrial Average heading toward another milestone at 17,000, Rob Stein, founder and chief executive of Astor Investment Management, believes the stock market is virtually in set-it and forget-it mode. Forget about the extended run off the 2009 low point. Mr. Stein is looking at the current market against the backdrop of a slowly improving economic environment. “The risk-return outlook at current levels is compelling,” he said. “I wouldn't buy stocks and lever them up, and I wouldn't say you should sell the house to buy stocks, but the outlook is compelling.” InvestmentNews: What makes you bullish on equities after such a long market run? Mr. Stein: We think the probability is high for risk assets to appreciate over the next several quarters because of economic fundamentals. We have a pretty low hurdle of what we need fundamentally from the economic data to continue to push stock prices higher. InvestmentNews: I take it you're not a believer, at least this year, in the adage about selling in May and going away? Mr. Stein: For starters, I think market timing is tough. But I don't see any reason why selling in May and going away makes sense if we expect stocks to be higher at end of the year. It's not worth the risk of missing another 6% between now and end of the year. It might even be 8%. (Related: Emerging-markets rebound hasn't convinced everyone)

GREATEST RISK

InvestmentNews: Where do you see the greatest risk in equities? Mr. Stein: We still see risk in emerging markets and in the international space. There's plenty of risk there. As far as sectors go, I think the tech sector might have a little more risk-associated with the return you're going to get. InvestmentNews: Do you see any risk associated with geopolitical unrest unfolding around the world, including Iraq and Ukraine? Mr. Stein: Geopolitical risk doesn't factor into our outlook. Politics and economics are too different things. The geopolitical events, in the context of the economic foundation we have right now, have much less effect on the stock market then when economy is more fragile. The economy is pretty solid right now. It could be stronger, but it's solid. InvestmentNews: Do you think the economy is strong enough for the Fed to start raising rates? Mr. Stein: What the Fed is looking at in terms of interest rates is off into the future. They want persistent inflation and they want unemployment in the low 6% range. But right now. economic growth is coming in around the zero line. Forget what you're hearing people who are yapping about the need for higher interest rates. There's no compelling reason to raise rates and stop the flow of capital.

Latest News

Maryland bars advisor over charging excessive fees to clients
Maryland bars advisor over charging excessive fees to clients

Blue Anchor Capital Management and Pickett also purchased “highly aggressive and volatile” securities, according to the order.

Wave of SEC appointments signals regulatory shift with implications for financial advisors
Wave of SEC appointments signals regulatory shift with implications for financial advisors

Reshuffle provides strong indication of where the regulator's priorities now lie.

US insurers want to take a larger slice of the retirement market through the RIA channel
US insurers want to take a larger slice of the retirement market through the RIA channel

Goldman Sachs Asset Management report reveals sharpened focus on annuities.

Why DA Davidson's wealth vice chairman still follows his dad's investment advice
Why DA Davidson's wealth vice chairman still follows his dad's investment advice

Ahead of Father's Day, InvestmentNews speaks with Andrew Crowell.

401(k) participants seek advice, but few turn to financial advisors
401(k) participants seek advice, but few turn to financial advisors

Cerulli research finds nearly two-thirds of active retirement plan participants are unadvised, opening a potential engagement opportunity.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today’s choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave