Stepping into the new year, Herbert Beyenbach of Boca Raton, Fla., an active trader in stocks and options, is making a move into shares of Citicorp and a financial stock fund.
“Once the whole economic picture clears up, I think the financials will do well,” he says, even though he expects the economy to remain difficult for the next six months. Citicorp, “is undervalued, the whole franchise, despite the potential losses (still ahead).”
Like Beyenbach, many investors are picking through the rubble of a troubled year and trying to make their best bets for the future.
Saving is in, spending is out and investing looks tricky in 2010.
There’s a watchfulness in the year-end predictions from Wall Street about whether the U.S. economy’s recovery, which began in late summer, will last and whether U.S. companies can grow profits at a time when consumers are saddled by debt, job losses and fear.
But there are hopeful signs. Among individual investors, the pessimism brought on by last year’s near-meltdown on Wall Street is beginning to fade. Charles Schwab reported in early December that among active investors, 54 percent expect the economy’s recovery to continue in the year ahead.
“The toughest thing people have to accept is if they do need growth in their portfolio over time, they’re going to have to stick with equities,” said Matt McGrath, managing partner at Evensky & Katz in Coral Gables, Fla. “It’s been frustrating for the last decade. But they are not going to get growth in bonds they will not get growth in cash and they will not get the growth they need in commodities.”
The records, long-term and short, are not easy to look at.
First, a look back — a long way back. The U.S. stock market over the last 10 years is down by double digits. The Dow Jones Industrial average, in the 10 years through Dec. 1 is down 10 percent, the Standard & Poor’s, down 25 percent and the Nasdaq down 47 percent. It was the only decade in the past 90 years to post a decline, says Standard & Poor’s Chief Investment Strategist Sam Stovall. That includes the 1930s.
But the down year in 2009 began to break by early March. Since then, the Dow is up 60 percent through Dec. 1.
Which means stocks are strongly ahead, but plenty of long-term portfolios are not.
If you’re still scared about stocks, McGrath said one easy way to make investing palatable is to set up a regular contribution schedule. Shovel a certain amount of money in and don’t vary, based on what the market is doing. “That’s a key mistake to avoid,” McGrath said.
If you’re building a diversified portfolio with a variety of stocks and bonds, there are a few themes that South Florida financial advisers see for the coming year.
Steve Pomeranz of Pomeranz Financial in Boca Raton said investors may be able to benefit as Washington creates more regulations. He suggested taking a look at utility company stocks, which have regulated profit margins and strong dividends, and which haven’t recovered quite as much as the rest of the market. Their upside potential is due to future growth in profits, he said. “If they need to raise their prices, they get permission (from regulators) to raise them,” he said.
Dr. Robert Bronfman, a retired orthopedic surgeon and president of the Southeast Florida chapter of the American Association of Individual Investors, has his eye on health care stocks. In the short-run, health care reform will probably not be positive, but in the long-run, he sees it as having a dramatic impact on doctors, hospitals and technology used in medicine as more people, including the millions of uninsured, seek treatment.
Finally, there’s plenty of interest outside of the U.S. in emerging market stock mutual funds, including those that invest in companies in Brazil and other Latin American countries. Investors who make this play are betting on developing nations where growth is expected to be stronger than in the U.S. and demand for raw materials will be high. “This suggests that the commodity rally will continue into 2010,” said a UBS Wealth Management outlook report for 2010.
“I think we’ll get back to normal and dispel some of the fears,” Pomeranz said. “I think the idea is to stay the course with your long-term plan. Make sure that if the market doesn’t do well, you keep money outside the market if you need it to live on, so that you can get through a down cycle.”
(c) 2009, Sun Sentinel. Source: McClatchy-Tribune Information Services.