How high can we go?
The Dow and S&P 500 hit new and notable records Monday, reviving a debate among nervous investors. Are the stock markets entering bubble territory? Is it too late for folks still on the sidelines to invest in stocks?
The answers, say some area financial advisers queried Monday:
No and no.
Continuing their bull runs Monday, the Dow topped 16,000 and the S&P rose above 1,800 — both records. By day's end, the Dow closed at 15,976.02 and the S&P at 1,791.53.
"We're not in bubble territory but, given the market we have had, no one would have guessed a year ago we would be enjoying these returns," said adviser Ray Ferrara, chief executive officer of Provise Management Group in Clearwater. "When the market goes the other way, investors will need to be patient because the economy is still growing."
Other veteran advisers offered similar views, along with cautionary reminders that markets are volatile.
Up is the trend of late with stocks hitting multiple records. Several advisers warned that investors waiting with cash on the sideline for some significant market correction — a dip of 10 or even 20 percent — before jumping in may be waiting longer than they might expect.
Bob Doyle of Doyle Wealth Management in St. Petersburg said Monday's S&P record differs from two market highs reached in 2000 and in 2007. In contrast to those records, he said, stock prices now are lower compared to company profits.
That suggests we are not approaching a bubble in the markets. Today's stocks may not be as cheap as they were a year or two ago, Doyle said, but for longer-term investors, stocks still look better than many traditional alternatives.
Even bonds, a traditional "safe haven" for investors, have greater risk now because interest rates are rising.
Much of the market's momentum may depend on the easy-money policy or "quantitative easing" endorsed by incoming Federal Reserve Chairwoman Janet Yellen.
"I am more afraid of bonds than stocks," Doyle said.
"We still think U.S. equities over the longer term will outperform all other asset classes," said Tampa's Douglas K. Reller with the Equis Group at Morgan Stanley.
At St. Petersburg's Raymond James & Associates, managing partner Jeffrey Saut says it is his belief that "we are into a new secular bull market, which is drawing similar catcalls from the negative nabobs of the investment community."
Beneath the "ebullient dance of the Dow" is a battle between good and bad, Saut said in a market commentary.
The bad? Mortgage interest rates are again rising, which may hurt housing.
The good? Gas prices at their lowest since 2011 are "tantamount to a huge tax cut for the American consumer."
More stock highs may bring some relief to those still wincing from the 2009 crash. For investors scared off stocks as overpriced, it may be time to reconsider. Even now.
Robert Trigaux can be reached at [email protected]