Peak investing has some looking for a dip
NEW YORK — Everything is awesome for investors. Everything.
Stocks are near peak levels. Bonds are making money despite a raft of predictions to the contrary at the start of the year. Stock markets overseas, poor investments for much of the last decade, are heading higher. Even gold, which typically glitters brightest when other markets are struggling, is up this year.
If it feels precarious to have so many investments doing so well, particularly when the economy itself is still growing only modestly, markets are giving few indications of worry.
The volatility index that traders use to measure fear in the U.S. stock market hit its lowest, as in calmest, level last week since 1993.
On Thursday, stocks fell moderately as technology firms and small companies skidded. Investors bought high-dividend stocks, which pulled the market away from steeper losses.
Analysts pin much of the credit for the upsurge in markets through most of this year on all the stimulus that central banks have thrown at them.
By keeping interest rates low and buying trillions of dollars of bonds, the Federal Reserve, European Central Bank and others have helped lift prices for bonds. And when bonds get more expensive, it makes stocks and other types of investments more attractive in relative terms, even if their price tags no longer look cheap at face value.
That has some contrarians worried about what will happen as the Fed continues raising interest rates and talks about paring back its bond investments. And, perhaps more importantly, what will happen when other central banks join in. Mom-and-pop investors seem relatively unfazed for now. They have been plowing cash into stock and bond funds this year, but concerns are bubbling up elsewhere.
Bill Gross, the famed bond fund manager, recently cautioned investors to not “be mesmerized by the blue skies created by central bank” actions.
“All markets are increasingly at risk,” he wrote in his most recent investment outlook.
Big institutional investors have begun cashing in some of their winnings and have sold some stocks or moved into less-risky areas of the market, said Kirk Hartman, global chief investment officer for Wells Fargo Asset Management. Even he himself has dialed back a bit on stocks.
If stocks do end up having a sharp pullback, he wants to have cash on hand to pounce quickly and buy some more.
“My worry is more about the bond market than it is in the equity market,” Hartman said. “The good times are rolling, but I worry that at some point it has to end.”