Tags: Light | stocks | PE | bull

WSJ's Light: Be Wary of Abandoning Stocks

Monday, 29 Jul 2013 10:33 AM

By Dan Weil

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While stocks look pricey after their run-up of the past four years, you'd probably be wise to stay in the market, says Wall Street Journal columnist Joe Light.

The Standard & Poor's 500 Index has soared 154 percent from its March 2009 low.

"Bonds, the traditional alternative to stocks, look even more expensive, as Federal Reserve officials mull an end to bond-buying programs," Light writes.

Editor's Note:
See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

"Cash will almost certainly lose value after inflation. And alternative investments such as gold are too volatile to make up more than a small portion of a portfolio."

The current bull market has lasted about four months longer than the average of the 17 bull markets since 1921, according to S&P Capital IQ, and the market's gain nearly matches the 153 percent average.

But, "It is not in uncharted waters, and duration alone typically does not signal the end of a bull market," Sam Stovall, chief equity strategist at S&P Capital IQ, tells Light.

On a price-earnings (PE) basis, some sectors look cheap. For example, the energy sector's PE ratio, based on 12-month forward earnings, totals 12.5, compared with 14.5 for the S&P 500, according to FactSet. Information technology companies carry a PE ratio 13.6.

To be sure, after the market slipped amid weak earnings reports last week, some investors are starting to wonder about its staying power.

"The market is trying to figure out where we have some safety, and where we have top-line and bottom-line growth," Samuel Lieber, CEO of Alpine Woods Capital Investors, tells Bloomberg.

"The underlying trend is being questioned."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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