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Tomi Kilgore
March 10, 2011, 12:01 a.m. EST
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By Tomi Kilgore
NEW YORK (MarketWatch) "” Time goes pretty fast when you're making money. And on the second anniversary of the current bull market's beginning, there is no reason for stock investors to expect that to change just yet.
On March 9, 2009, when the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,213, -1.29, -0.01%) closed at 6,547 and the S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,320, -1.80, -0.14%) at 677, investors were fearing a repeat of the Great Depression. Two years later, and after rallies of 86.6% and 95.4%, respectively, investors are feeling some growing pains.
Economic data indicates the tailwind behind the economy's recovery is strengthening. Meanwhile, the rise in oil prices to a 2-1/2-year high is a potential headwind. And after such big gains for stocks in a short period, investors fear a significant correction is coming, they just aren't sure when.
Michael Iachini of Charles Schwab discusses the surge in ETFs and where the ETF market is headed.
Since the timing of bullish and bearish forces isn't quite in sync, investors have had a difficult time picking sides. Should they wait to buy after a pullback, or wait for another move higher before they start selling? As a result, stocks are going nowhere fast.
Since closing at a multi-year high 2-1/2 weeks ago, the Dow has closed up or down by triple digits five times, the same number as in the preceding 2-1/2 months. Meanwhile, the Dow has lost just over 1% since Feb. 18.
At times like these, Thomas Dorsey, president of Dorsey, Wright & Associates, said it's best not to guess on what fundamental force or market direction will win out.
"People are always looking for what might be, and trying to predict," Dorsey said. "You have to look at what is. That's the only thing you can operate on."
He said his investment "aircraft carrier," which implies the direction doesn't change easily or very often, is still heading in the direction of higher equities in the U.S. and abroad. There could be a storm on the horizon, but the direction won't change until it actually hits.
The Middle East situation is a concern, but Gartman Letter editor and publisher Dennis Gartman said things could continue to ebb and flow, perhaps for years, so the only thing certain is that there is nothing certain. "Upon that one can bet ... heavily; on all else one should avoid any and all bets," he said.
Basically, while the Middle East and its effect on oil prices should be recognized as a risk, it shouldn't be a reason to make key investment decisions until there is a definite outcome.
Investors may also doubt the S&P 500 can do much better than doubling in two years, but Citigroup chief U.S. equity strategist Tobias Levkovich said that over the last 80 years, there have been a number of other post-bear market rallies that have gone farther and lasted longer.
"The current bear market bounce is only the sixth best so far since 1932," Levkovich said. "The best gain was posted in a four-year span beginning in 1942 of 157.7%."
So for the next two years, it wouldn't be without precedent for the S&P 500 to keep rising until it reaches 1,745. A similar rise in the Dow would put the index at 16,872.
Tomi Kilgore writes Taking Stock, a column featuring insightful analysis of equity-related topics around the world. This column originally appeared on Dow Jones Newswires.
Oil giant takes aim at investors underwhelmed by its pursuit of new reserves.
6:16 p.m. March 9, 2011
"Moody's downgrades Spain's government bond ratings by one notch to Aa2 from Aa1 http://on.mktw.net/hePHbj" 2:39 a.m. EST, March 10, 2011 from MarketWatch
"China unexpectedly posts $7.3 billion trade deficit in Feb as export, import growth slows http://on.mktw.net/igLBkr" 10:20 p.m. EST, March 9, 2011 from MarketWatch
"Hong Kong stocks inch lower as insurance, resource shares drop; Hang Seng Index down 0.2% http://on.mktw.net/fqRb3R" 8:33 p.m. EST, March 9, 2011 from MarketWatch
"Japanese stocks fall at open, as techs follow Nasdaq lower; Nikkei Average down 0.4% http://on.mktw.net/g75IOm" 7:06 p.m. EST, March 9, 2011 from MarketWatch
"RT @MWRadio: Happy birthday, bull market! You're now two years old. Now what? http://fb.me/wT5QQcks" 6:25 p.m. EST, March 9, 2011 from MarketWatch
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