Including today, stocks have fallen 8 days out of the last 9 – with last week the Dow posting its worst five-day stretch in five months… Financial advisers say the latest worries among investors makes sense. “The past 5 years of volatility has shattered confidence in the markets,” says Charles Sizemore, a financial adviser in Dallas, Texas, “and with the steady stream of gloomy news coming out of Europe, sentiment has only gotten worse.” Trading volume has been abnormally low for last year as many investors move to the “perceived safety of bonds from the perceived riskiness of stocks,” he says.
Still, many advisers are trying to prevent clients from selling, pointing out that broader economic trends favor stocks. For example, consumer confidence in May rose to the highest level in 4 years, according to Thomson Reuters/University of Michigan preliminary index. Meanwhile, labor’s share of income in the U.S. — in other words, corporate profits — is at an historic low, which Glenn Guard, director of investment management at Alexandria, Va.-based Campbell Wealth Management, says suggests that corporations have strong balance sheets and have the ability to hire. “We’re going to see a de-coupling of the economies in the U.S. and Europe,” with the U.S. markets outperforming in the near future.
In fact, some see the latest market drop as buying opportunity. Guard suggests “high quality, global dividend-paying stocks” such as Procter & Gamble (PG). “They’re selling Tide detergent to the Chinese and Crest toothpaste to the Brazilians,” he says. Sizemore also favors dividend-payers currently trading at low prices relative to earnings, including Microsoft (MSFT), Intel (INTC) and Johnson & Johnson (JNJ).
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