Advisers urge caution over US share rally

NEW YORK REPORT

THE Dow’s run to record highs in the stock market’s rally this year may not mean it’s time for investors to go on a buying spree.

Instead, many financial advisers are telling clients to go easy, whether they are just getting back into stocks or seeking to add to equity positions.

Questions over how much higher the market can go have kept caution in play, with some technical indicators suggesting the market is overbought.

But the case for investing in stocks is strong, they said, particularly given signs of more strength in the economy, especially Friday’s jobs report, which showed a much higher-than-expected 236,000 workers added to the payrolls in February.

“We’re telling clients to take a more defensive approach to the market right now,” said Frank Fantozzi, chief executive of Planned Financial Services, an independent wealth manager in Cleveland.

Yet stocks remain a better choice than other asset classes, he said.

“We still think the market is going to post positive gains for the year.”

Last week, the Dow Jones industrial average rallied on Tuesday to break through levels not seen since 2007 and continued to reach new highs the rest of the week. On Friday, the Dow closed at a record 14,397.07. It is now up 9.9 per cent since 31 December.

The broader Standard & Poor’s 500 ended Friday’s session less than 1 per cent away from its record close of 1,565.15, which it reached on 9 October, 2007. The S&P 500 is up 8.8 per cent since the end of 2012.

Valuations remain relatively attractive. The S&P 500’s forward 12-month price-to-earnings ratio, a commonly used measure to value stocks, is at 13.8 per cent, still below its historic average P/E of 14.8 per cent.