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While Wall Street's recent surge may vanish just as quickly as it arrived, the rebound came with something the market hasn't seen in awhile—buying into a rally.
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Tammy Gray / AP |
Since stocks entered bear-market territory during the summer, investors have been notoriously skittish during rallies —often staging late-day selloffs on hopes of quick profits and fears that there are too many headwinds to sustain a move higher.
But that wasn't the case with the nearly 900-point Dow rally of the past two trading days, particular during Monday's move upward which saw buyers take a mid-day break but then return with full fury as indexes closed about up 5 percent.
"The sentiment's starting to switch a little bit," says Nadav Baum, managing director of investments at BPU Investment Management in Pittsburgh. "People are talking that this is a bear market rally, but it could go on a little bit."
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In addition to snapping up some of the bigger market movers, investment advisors are pushing their clients into broad-based exchange-traded funds that take advantage of moves higher in the major indexes without as much risk as buying individual stocks.
Also, municipal bonds are getting a lot of attention as market pros look for ways to protect principal while also trying to squeeze out at least modest yields.
"Most of the tax selling is done and the hedge fund redemptions are over," Baum says. "Hopefully we can turn the old Santa Claus rally into year's end. There are some great companies out there that are trading at major discounts."
Obama and the Treasury
Analysts were cheered on Tuesday that even though markets wobbled throughout the session, there was no massive sell-off and stocks ended mostly higher. In fact, it was the first time the market had three straight days of gains since September.
The most influential market movers since Friday have been President-elect Barack Obama's appointments of his economic team and a new round of government intervention aimed at stopping the bleeding on Wall Street.
Amidst the developments, investors have been finding value in a variety of ETFs and a handful of strong companies.
Baum has been using the Vanguard Value [VTV
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] ETF, which tracks the MSCI US Prime Market Value index. Some of the companies in the fund include ExxonMobil [XOM
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], General Electric [GE
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], Johnson & Johnson [JNJ
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] and Chevron [CVX
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]. The fund also pays a 5 percent dividend.
In addition, Baum likes some the Select Sector SPDR, or "Spider," ETFs that are popular among investors and play the broad indexes. He advocates the S&P Deposit Receipts [SPY
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] which tracks the movement of the S&P 500.
"You can buy these great baskets of equities and get returns of individual equities," Baum says. "That's a very smart thing to do for individual investors--spread out the risk and still get nice returns."
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