Why it's not too late to ride the equity bull market

Too many investors are still underinvested, even after the stock market has blown past Wells Fargo's 2013 target for the S&P 500 by about 6%
DEC 11, 2013
Investors with piles of cash should still be pushing to get into stocks despite the market's stellar year-to-date gains and new all-time highs, said Wells Fargo Advisors' senior equity strategist, Scott Wren. “Today, you put one-third of cash in without thinking twice,” he said. Investors should put the rest to work through regular purchases, or dollar-cost averaging, and if there's a 5% to 10% pullback, step up the size of the regular purchases, Mr. Wren said. Mr. Wren is still banging the table for stocks today — even after the stock market has blown past Wells Fargo's 2013 target for the S&P 500 by about 6% — because too many investors are still underinvested. “A lot of clients are still not invested in stocks to the magnitude they need to be to not outlive their savings,” he said. “If we're right, and the market moves higher over the next three years, we want clients to participate in that.” Wells Fargo is betting that the stock market will rise over the next couple of years because of the slow growth and low inflation in the U.S., and the improving economies in Europe and the emerging markets. “Modest growth and modest inflation have been the story for the past few years and we expect it to be the story for the next few years,” Mr. Wren said. “Stocks can grow in that.” Still, Wells Fargo doesn't expect returns to match this year's market return of more than 25%. In fact, this year's outsized returns are the main reason Wells Fargo has downgraded U.S. equities to equal weight, from overweight, at this time last year. It also has developed-international and emerging markets pegged as equal weight. To get to those targets, though, investors are most likely going to have to do some re-balancing inside their equity portfolios. “Re-balancing is one of our key themes,” Mr. Wren said. “When you have big moves, you need to [bring] the portfolio back in line with the long-term strategy.”

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