Individual Investors Nervous About Stocks Despite Dow 14,000

Wednesday, 06 Feb 2013 11:43 AM

By Ronald Kessler

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Although the Dow Jones Industrial Average hovers near 14,000, not everyone is enthusiastic about the stock market, financial advisers say.

“We have some clients who are coming off the sidelines and getting more comfortable with stocks, but we also have some who want to wait a few more months before they do anything,” John Foxworthy of Phillips Financial in Fort Wayne, Ind., told CNNMoney.

In addition, Foxworthy isn’t seeing a surge in new clients, as was the case during previous market rallies.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

“People are still very anxious — more so this time around than in the past periods of economic recovery,” he noted. “The pain of the last downturn is still part of the social consciousness.”

TD Ameritrade’s Investor Movement Index is also reporting a drop in investor optimism. The index, which is based on data from the firm’s base of 6 million retail accounts, fell in January after rising for several months, according to CNNMoney.

Steve Quirk, senior vice president of TD Ameritrade’s Trader Group, said retail investors cut their exposure last month to lock in profits.

CNNMoney’s Fear & Greed Index has also fallen. The gauge, which looks at the CBOE Volatility Index (VIX) and six other indicators to measure the mood of the market, has dropped to 79 from a peak of 94 a week ago.

Keith Springer, president of Springer Financial Advisors in Sacramento, Calif., believes stocks will exceed their all-time highs in the coming months. But he’s not advocating clients change their portfolios based on the prediction, as his clients are primarily within five to 10 years of retirement or are already retired.

“They can’t afford to lose money or even break even, so we invest for need — not greed,’’ he told CNNMoney. “A majority of investors are still scared to death and waiting for the next shoe to drop.”

Gary Webb, CEO at Webb Financial Group in Bloomington, Minn., cited lawmakers as a potential impediment to a continued run-up in stocks.

“The fighting, bickering and lack of agreement and compromise could be the cause of a major correction or pullback,” he said.

However, Webb added that a favorable resolution to the budget battle could send the market “through the roof.”

As Webb’s clients are adding to their stock portfolios, they are also hanging onto bonds and remaining in defense mode, he noted.

“The market’s been going up for four years and it’s possible that it will pull back at some point,” he said. “Our clients are prepared for both situations.”

John “Jack” Bogle, founder of The Vanguard Group, is not excited by Dow 14,000.

“Something like the Dow going to 14,000, I can contain my enthusiasm about that,” he told CNBC. “It doesn’t mean very much.”

While retail investors have started to return to the market — U.S. stock mutual funds enjoyed a net inflow of $6.8 billion in the first three weeks of January — it hasn’t been a torrent, Bogle said.

Have individual investors returned to stocks in earnest?

“I think the answer is no,” Bogle said. “January is seasonally a very good month. … So it’s not the big pop that one would think you’d get.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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