Tags: Investors | shift | stocks | cash

WSJ: Some Investors Shift Money From Stocks to Cash

By    |   Tuesday, 08 July 2014 09:40 AM

As the stock market marches inexorably to new highs, with the Dow Jones Industrial Average breaking through 17,000 last Thursday, not everyone believes that further gains are a slam dunk.

And some are switching money to cash, hoping to get back into stocks after valuations drop. The S&P 500 had a trailing price-earnings (P/E) ratio of 19.4 Thursday, up from 18.4 a year ago, according to Birinyi Associates.

Small-cap stocks in particular are "outrageously expensive" and have significant risk, Eric Cinnamond, manager of Aston/River Road Independent Value fund, told The Wall Street Journal.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000


The Russell 2000 index of small-cap stocks had a trailing P/E ratio of 83.4 Thursday, up from 59.2 a year ago, according to Birinyi Associates.

Cinnamond has 70 percent of his fund's assets in cash now.

While naysayers warn that cash limits you to a near-zero return, Charles de Vaulx, chief investment officer at International Value Advisers, told The Journal, "The true return on my cash incorporates the fact that it will enable me to make tons of money later, on a depressed stock or bond."

However, individual investors might not know how to time their trades. "The risk is that they build up their cash and don't know when to get more invested," noted Greg Estes, who manages Intrepid Disciplined Value.

Second-quarter earnings reports may determine stocks' near-term direction.

"Valuations are pretty stretched, and we don't see a lot of revenue growth, which might be negative for the market," Bruce Bittles, chief investment strategist at RW Baird, told Bloomberg.

"There may be some concern about earnings, but this is basically a market being driven by an improving economy and guarantees by the Federal Reserve that they're not going to raise interest rates."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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As the stock market marches inexorably to new highs, with the Dow Jones Industrial Average breaking through 17,000 last Thursday, not everyone believes that further gains are a slam dunk.
Investors, shift, stocks, cash
308
2014-40-08
Tuesday, 08 July 2014 09:40 AM
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