Tags: Hughes | Roche | market | economy

Divine Capital's Hughes: Buy on the Market Dips

By    |   Wednesday, 07 May 2014 12:49 PM

The rash of stock market pundits calling for a crash may get to feel vindicated if the worst comes true, but they rarely make investors any money, according to Danielle Hughes, CEO of Divine Capital Markets.

Instead, her strategy is to buy on weakness and invest for the long haul, which she told Yahoo can overcome market gyrations and the doomsayers over time.

"At some point the market is going to crash and then it's going to come back," she predicted. "Right now we're in an artificially suppressed interest rate environment and it's going to be that way, according to the Fed, for a while."

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Hughes said most investment managers have to be fully invested, although she said Divine Capital sometimes temporarily parks cash on the sidelines to look for opportunities. This is one of those times.

"Earnings really have to drive the economy over time. Big companies and little companies have to invest in real productive assets. But to do that, they're going to take a hit to earnings. What do you want — the long-term growth of the short-term buzz?"

Hughes said she has taken advantage of recent weaknesses in some stocks to reinvest her cash. "I did take some profits over the last six or seven months. . . . In these kinds of intermediate downturns, we've taken a little bit of money and put it back into the market."

Cullen Roche, founder of Orcam Financial Group, wrote on his Pragmatic Capitalism blog that perpetual stock market bears do not have a good long-term track record.

"Over the long term, betting against human progress and innovation has been a very bad bet," he said.

Roche noted that in the post-war era since 1945 the U.S. economy has been in recession 16.2 percent of the time. And the undeniable flip side of that is that fact that the economy has been in expansion 83.8 percent of the time since 1945.

"Betting on recessions is usually a very bad bet and that means the economy is generally expanding," Roche argued.

He said that while the stock market is not the same as the economy, data from Morningstar show that the long-term trends between the economy and stocks are very similar.

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The rash of stock market pundits calling for a crash may get to feel vindicated if the worst comes true, but they rarely make investors any money, according to Danielle Hughes, CEO of Divine Capital Markets.
Hughes, Roche, market, economy
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2014-49-07
Wednesday, 07 May 2014 12:49 PM
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