Even with the Dow's rapid climb to 14,000, many market pros think the stock rally isn't over.
"We're only in the middle earnings reporting season, economic data continues to flow in a positive direction, the fact that we can overlook $75 oil and we can move higher is very telling," said Art Hogan, the chief market strategist at Jeffries and Company. "The shock value of higher energy prices is gone from us, so we're able to move higher. We've got high levels of employment and no real signs of inflation creeping in, so the market's in a pretty good spot here."
Robert Heller, a trader at Chapedelaine Brokerage, agrees with Hogan's assessment saying that he's still "bullish on the market", but isn't sure if the market "can maintain the tremendous pace it's had for the last week or so."
Interest rates are still low in Heller's opinion. "A lot of companies have been able to refinance their debt and streamline their liabilities. There's also the fact that Dow companies are international and as overseas markets grow that's helping them along".
So far this year, the Dow, made up of 30 stocks, is up 12 percent reaching record highs along with the Standard and Poor's 500 . The Nasdaq Composite remains about 2,300 points below its all time high.
“Stay with the market,” says Lincoln Anderson chief investment officer and chief economist at LPL Financial Services. “The S&P 500 is still in the reasonably priced range. We’ve had huge earnings since Dow-10,000. S&P earnings are up 60% and the S&P is up just a little bit from that time period. Dow company earnings are up 50% and the Dow is up a little less than 25%.”.
“Long term investors should continue to invest,” says Al Goldman, chief market strategist at A.G. Edwards. “The overall valuation level is quite reasonable at about 16.5 times earnings, the economy is doing what the Fed wanted it to do, it slowed down but is still growing. Corporate earnings earnings are going up and we’ve got a world awash in money.”
Goldman adds “anyone who argues with momentum, until momentum becomes irrational, which I don’t think it is right now, is going to get slaughtered.”
Ed Peters, chief investment officer with Panagora Asset Managers. sounded a more cautious tone saying that 14,000 as a number “is not that important, adding that, “people should be a little more cautious then thinking we’re back to 1999 again.”
“I think people are getting euphoric. The markets are facing a lot of headwinds here – we have interest rate problems, possible inflationary problems, and essentially the possibility of a global growth slowdown," says Peters.
Michael Aronstein, chief market strategist of Oscar Gruss says his firm will continues to emphasize large cap stocks to clients, like Dow components, because of their balance sheet quality.
“We expect over the next year or so you will see a shift, in which companies are rewarded for having higher quality balance sheets rather than being rewarded for adding leverage and buyback stock.”
Aronstein adds, “the Dow has performed pretty well across the board and the defining factor of those 30 stocks is that they’re big and probably not going to be subject to the external pressures, or LBOs.”