INSTANT VIEW 5 - Dow industrials surge to new record
March 5 (Reuters) - The Dow Jones Industrial Average pushed through its record high last hit in 2007, as investors continued a rally that has boosted the index by more than 8 percent so far in 2013.
COMMENTS: STEPHEN WOOD, CHIEF MARKET STRATEGIST AT RUSSELL INVESTMENTS IN NEW YORK, WITH ABOUT $180 BILLION IN ASSETS UNDER MANAGEMENT:
"It has been a long, grinding recovery, but the private economy is holding its own in the face of very challenging policy and political risks. Over the past few quarters, markets have been pricing through volatility. There is a lot of momentum and rotation going into equities from cash and bonds, and right now sentiment seems to have the upper hand over fundamentals, which haven't changed dramatically. It will still be volatile from here, and we're expecting high-single digit returns for U.S. equities on the year, but it looks like China is making a commitment to stimulus and Europe realizes it has very serious issues. That's all positive."
CHARLES NENNER, PRESIDENT OF THE CHARLES NENNER RESEARCH CENTER, AMSTERDAM, THE NETHERLANDS:
"We're selling everything around here. I think we're forming a top, it doesn't mean it's going to turn around immediately, but it's too risky for me.
"All the people who missed the whole rally are pouring into the market now, and the people who started buying at the low of 2009 are selling."
ALAN GAYLE, SENIOR INVESTMENT STRATEGIST AT RIDGEWORTH INVESTMENTS, RICHMOND, VIRGINIA:
"I think that the stock market is riding the wave of global monetary stimulus. This is a market that wanted to test the old highs, but it is stretched. It's reaching out on a limb for that last piece of fruit. This stance is somewhat vulnerable.
"We're still going to have to digest some of the spending cuts that have gone in and the tax increases."
JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO PRIVATE BANK, CHICAGO
"The Dow gets the headlines. I think there is a fair amount of Americans who remain skeptical about stocks. With the Dow hitting a record, they could perhaps encourage them to get out of the wading pool into the deep end. Given the valuation differential between stocks and bonds, the market will trade higher. As individuals get tired of measly yields, they could move into the market.
"For me, we are at fair value. The upside of the market is limited by the Fed. If the market rallies another 10 percent, we could see stirring at the Fed. They will have to address of what potentially another bubble."
RYAN DETRICK, SENIOR TECHNICAL STRATEGIST, SCHAEFFER'S INVESTMENT RESEARCH, CINCINNATI:
"For the average investor, this could mean things have turned around, even though we had a lot negative news like the 'fiscal cliff.' If you believe the stock market is a leading indicator of the economy by six to nine months, there could be stronger U.S. economy coming later this year.
"People had sold equities earlier and missed out on a chunk of this rally. This makes those who held on to their stocks feel better.
"One thing we do like is the new high on transportation and it has been leading again. The market seems to be shrugging off all of the negative news.
"In the past few years, we have had ripples and pullbacks in stocks. We have a real strong first quarter. Then we have a summer correction. We still think we have a strong bids to this morning. Pension funds are very under-invested in equities. We have a target of 1,650 for the S&P 500 this year. That's still a pretty logical target.
"The services industries are doing well on a global basis. We haven't seen inflation yet. This is a positive for stocks. Bonds haven't had a sell-off though. They are hanging tough. In the near term, there are still a lot of near-term uncertainties from Europe and Washington."
ROBERT TIPP, CHIEF INVESTMENT STRATEGIST AT PRUDENTIAL FIXED INCOME IN NEWARK, NEW JERSEY:
"This is a classic bull market, climbing the wall of worry. Valuations in the equity market are spectacular. Meanwhile, positioning in some segments of the investor community, particularly retail, are light, while cash balances are extraordinarily high among retail investors.
"Stocks are incredibly cheap. They are as cheap relative to bonds as they were in the mid-1970s. They hit these valuations back in 2009 and the valuations have remained extremely favorable since then despite the higher prices, by virtue of the fact that the fundamentals have improved as evidenced by solid earnings growth.
"We are seeing the 'great migration.' But it's not the great migration people expected. There's a fear out there that a wave of money will move out of bonds into stocks. But the money will not come from bonds. It will come from cash, the most expensive asset.
"You will continue to see steady flows into fixed income which is expensive in some sectors like Treasuries, but is still fairly cheap in other sectors.
"Investors will chase the equity market out of the cash balances."
ANTHONY CONROY, HEAD TRADER AT BNY CONVERGEX, AN AFFILIATE OF THE BANK OF NEW YORK:
"The numbers are real. The market's moving. You have billions of dollars changing hands day-in and day-out.
"You don't fight the Fed, and it seems to be fairly consistent with what's going on. We have a pretty strong market, the economy seems to be taking advantage of a low interest rate environment.
"What happens when this QE3 kind of evaporates or goes away, that's the major question in the back of my mind. But right now, the economy, the market, everything looks fairly healthy. Stocks still look fairly inexpensive."
ENIS TANER, GLOBAL MACRO EDITOR AT OPTIONS RESEARCH FIRM RISKREVERSAL.COM IN NEW YORK:
"I'm happy we got it out of the way and now we can focus on more important issues in the market. Maybe we can focus on the fundamental news such as earnings and macro economic policy."
HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON ADVISORS LLC IN ALBANY, NEW YORK:
"It's meaningful in the sense it obviously has a lot of media potential - it's likely to move stories about the stock market to the front page from the financial section. From that point of view it is good news in that it tends to lift spirits or raise confidence. There is the wealth effect of the fact that when you start to lift confidence it leads to stronger consumer spending. From that point of view it will have positive feedback on the economy."
"The question it is going to raise - which this market has raised continuously - is how is it this market is doing so way in the face of meaningful spending cuts coming out of Washington with the sequester? The message of the markets is although the sequester is likely to impact gross domestic product, it is not likely to end the current stock market business cycle, or the bull market expansion. It is not likely to interrupt the current cycle."
WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM MASSACHUSETTS:
"There is a component of this that is sort of a melt-up. Everybody is concerned about the low interest rate environment and the Fed pushing a little bit too long and too hard. That means that the larger, more global companies are going to be the benefactors, because the stimulus is not only domestic, it is global. A lot of these companies have dividends that exceed what their bond yields are, so from a rational standpoint it seems like a better investment in this environment."
MATTHEW LIFSON, CURRENCY TRADER, CAMBRIDGE MERCANTILE GROUP, NEW YORK:
"The question is, can the Dow maintain these levels? There's nothing coming out today that will alter the view of the U.S. economy. The market is interested in risk - that's why the Dow is higher, why the riskier currencies are higher. If you buy stocks, you want to be involved in all of this. And the only thing the sequester is doing right now is hurting air travel. It's not having much of an impact elsewhere."
(Americas Economics and Markets Desk; +1-646 223-6300)