Investors Showing Hardy Appetite For Risk
Stocks have recovered relatively quickly since the market meltdown in late February when the Dow Jones Industrial Average dropped more than 400 points.
Investors were quick to jump back in the market but are they paying too little attention to risk? Two market pros seem to think so.
"There's time for a pause, we don't know when that pause is going to be, but what we do know is that investors' appetite for risk is even more hungry," J.J. Burns, president of JJ Burns, told CNBC's "Power Lunch."
"People coming in have way too much allocated in the global markets, way too much allocated in stocks," Burns said. "The baby boomer of today doesn't think that he needs to really monitor his risk profile that much when he has so much allocated towards the stock market."
Sarat Sethi, portfolio manager at Douglas C. Lane, expressed a similar sentiment.
"In terms of risk and reward, the focus now is on reward," Sethi said. "People forgot what happened a few weeks ago and they forgot what happened six, seven years ago."
"One of the things that I think most investors (are ignoring), as they are chasing this rally, is the interest rate focus on inflation," Sethi said. "If that number creeps up a little bit higher, I think you are going to see the market pause and pull back."
Burns said global inflation remains a concern as one indicator closely watched by the Federal Reserve, the personal consumption expenditure (PCE) deflator, rose 0.3% in February.
"It is in the warning area," said Burns. "Yet so many economists and market strategists think that rates are going to go down, this will probably be the surprise, rates will probably end up edging higher and surprising investors coming into the latter half of this year."