Reasons to Stay Invested This Fall

Last week, I spoke with Covestor’s Mike Tarsala to give my outlook for the rest of 2013.

From Covestor’s Smarter Investing blog:

You can always talk your way out of investing,” Sizemore says. “The best antidote to that kind of thinking is to pick up a newspaper from a year ago. Look at the headlines at what people were worrying about then. It will all seem ridiculous — the same way that a lot of what we worry about today will look ridiculous a year from now.” Better questions to ask, Sizemore says, is if stocks are priced fairly, if there are pockets of investment opportunities and if there are reasons that the market may continue to rise. To his latter point, Sizemore believes there are three reasons why the stock market may continue to climb as we approach the end of 2013:
1. Syria Conflict May Be Averted
Uncertainties that are widely known and understood by most investors tend to be priced into the market, Sizemore says. For that reason, he thinks that any possible U.S. military conflict in Syria and how its potential impact on oil prices and corporate earnings are already factored into today’s stock prices. To the contrary, Sizemore thinks that the unlikelihood of war is not being reflected. “There is no consensus for a Western military response, and there is no support for this,” Sizemore says. “ If the U.S. does get involved at this point, the response is going to be really, really small.”
2. Stimulus Will Continue
For months, expectations have been rising for the Fed to begin cutting back on its monthly bond purchases — a fiscal stimulus move that seemingly has aided stock performance for much of 2013. It even has its own buzzword — tapering. “I am so sick of hearing the word tapering, Sizemore says. “I think it has already largely been priced into the market. A lot of the yield-sensitive investments have already gotten pounded. In my estimation, most of the damage has already been priced in.” Sizemore argues the Fed may taper less than many economists and investors are anticipating, which could also contribute to possible stock upside.
3. Valuations
There are stock values to be found, especially in European markets, Sizemore says — where many possible investments are being ignored by US investors. Many investors in the US may not be closely watching the news headlines about the sex scandal that has engulfed Italian Prime Minister Silvio Berlusconi. The good news, says Sizemore, is that it’s not moving European markets. “ A year ago, that would have caused a major market selloff. Now, the Italian market’s actually up. No one really seems to be reacting to political news in Europe anymore. And when the market stops reacting to bad news, that’s usually a pretty good sign that the bottom is in.” So for all that’s supposedly “wrong’” with the stock market, keep in mind that there’s almost always a scary headline somewhere. And at least in Sizemore’s eyes, there also are a lot of “rights” that make it worth sticking with stocks.