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Dow puts 17,000 in rearview

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Thursday, July 3, 2014, 10:09 p.m.
 

Joanne DiRinaldo sits at her computer for hours every day, watching stock prices rise like a quickening heartbeat.

As the Dow Jones industrial average neared a milestone this week, she tried not to get too excited and braced herself for disappointment if the market's peak is short-lived.

“I'm not going to cash out,” said Di-Rinaldo, a retiree from Murrysville. “But I do anticipate, psychologically, having to prepare for a pullback.”

The Dow topped 17,000 for the first time on Thursday, closing the day at 17,068 after a strong jobs report from the Labor Department. The headlines generated from the benchmark index hitting an all-time high may tempt investors to jump into the market for fear of missing out or to sell stocks while the market is hot.

Financial advisers urged caution.

Trying to anticipate market peaks and valleys is folly, they said, because nobody knows what will happen until they see it in the rearview mirror.

Despite the excitement, few money managers put much faith in an index tracking just 30 companies.

“The 17,000 level on the Dow is a nice round number, per se, but it doesn't really mean anything,” said Phil Orlando, chief equity strategist at Federated Investors, Downtown.

The Dow rose 92.02 points, or 0.5 percent, to 17,068.26, 7 12 months since it reached 16,000. The Standard & Poor's 500 index is approaching a milestone of 2,000.

Analysts say a correction is inevitable, perhaps this summer. The last time the market dropped 10 percent was 2 12 years ago, about a year longer than typical, said Chris Wiles, founder of Rockhaven Capital Management in Mt. Lebanon.

“We will have one,” Wiles said. “Generally, historically, we've had them every 18 months or so.”

The Federal Reserve's efforts to boost the economy fueled the rise in stock markets. The central bank kept interest rates near lows in hopes that cheap money will spur businesses to borrow for new investments. Fed Chair Janet Yellen has said the Fed could keep interest rates down through next year.

With low interest rates, safer investment vehicles such as bonds and certificates of deposit offer little return. Dividend- paying stocks are the choice of many investment managers.

“Where should investors be putting their money? Overwhelmingly, in stocks,” Orlando said.

Orlando is more bullish on economic growth than the consensus, noting utilities and telecom stocks have done well, with stable demand and high yields.

Wiles said his best-performing portfolio is 30 percent in domestic stocks, but includes a mix of real estate investment trusts, energy company master limited partnerships and low-risk/low-reward investments such as cash and bonds, despite the low-rate environment.

“I'm basically trying to cover as many bases as I can,” he said.

Investing in stocks requires long-term commitment and does not reward anyone who attempts to predict the market. There may be short-term losses for long-term gain.

“You should not have money in the market if you have to use it in less than three years,” said Kim Forrest, senior equity analyst at Fort Pitt Capital Group in Green Tree.

Orlando acknowledged that some correction is coming, but he doubts it would be a large one, perhaps 5 to 10 percent over the summer.

Tension in the Middle East or Russia could send the market tumbling.

Commodities such as metals or agricultural products are not performing particularly well, though Orlando recommended having some small exposure as a hedge against geopolitical developments.

“You've got so many problems going on that, frankly, no one knows what the solution is going to be,” he said. “Literally anything could happen, and we have no idea what the impact will be.”

DiRinaldo pays attention to events that affect her investments but tries to think long term.

“I believe a person accumulates wealth over years, not overnight,” she said.

Chris Fleisher is a Trib Total Media staff writer. Reach him at 412-320-7854 or cfleisher@tribweb.com.

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