A Year Later: Investors Hope Not to Get Gored By Bull

After a wild ride to historic highs then a violent crash and a narrow escape from a Depression, Wall Street might finally be in for a quiet ride in the country.

The stock market on Tuesday noted the one-year anniversary of the new bull market with far different conditions: Stocks have rallied more than 60 percent, the economy is at least off the floor and investors continue to get more comfortable after getting crushed the previous year.

Prevailing sentiment for the occasion was optimism that the biggest gyrations are over and the road ahead will be, if not without pitfalls and potholes, at least a more predictable journey.

Jeff Cox
Senior Writer
CNBC.com

"It was a once-in-75-year occurrence and hopefully everybody learned from it," says Uri Landesman, head of global growth strategies at ING Investment Management in New York. "After a wild decade of volatility left us with a flat S&P, I'd like to think we're entering the next decade where low double-digit gains are going to be the average and the volatility around them at least on a year-to-year basis has been reduced."

The Standard & Poor's 500 is up 68.3 percent in the past year, while the Dow is up 61.2 percent and the Nasdaq tech barometer has soared 83.8 percent. By a basic definition it has been a bull rally of historic proportions.

But in this case, the bull is in the eye of the beholder.

The major averages are still off a full 25 percent from their all-time highs of October 2007 and investors would probably be unwise to expect another 2009-size rally to restore portfolios to their former values.

"I don't think it will be so quick for us to be back where we were before," says Emily Sanders, CEO of Sanders Financial Management in Atlanta. "There's many, many more bank failures to come and Main Street is going to be suffering for years. Clearly Wall Street has recovered, but as far as consumer spending and Main Street, we're still very skeptical about that part of the recovery."

How rapid the pace of recovery—not the recovery itself—seems to be the biggest sticking point.

"There's still a lot of growth to be had," says Jim Grefenstette, senior portfolio manager at Federated Investors in Pittsburgh. "The market's trading at 12 times next year's earnings estimates, which is not expensive at all especially when you look at where inflation is. The market's anticipating more good growth and as that delivers we could certainly continue to trend higher."

Another question will be how avid investor sentiment will get and whether any lessons have been learned from the market crash in 2008.

Wall Street and its legion of portfolio advisors and money managers across the country made enormous bets that the real estate bubble in the middle part of the past decade was sustainable.

When housing prices ballooned out of control and the bubble burst, the securities that underwrote them collapsed and brought the rest of the investing world down with them.

Such exuberance could raise concerns that investors will get overconfident coming off such an aggressive bounceback.

"We look at this as essentially a tsunami. Most people aren't aware but the second wave of the tsunami is worse than the first," says Michael Rubino, CEO of Rubino Financial Group in Troy, Mich. "The market is looking out six months at all these adjustable-rate mortgages that are coming down the pike that will be resetting. We don't feel that bodes well for the market or the economy."

Rubino thinks investors might be able to find some upside in the current market but will be better off in cash until the second wave crashes to the shore.