3:30 pm ET
Dec 21, 2014
After U.S. Stock Rally, Some See Danger in New Year
By E.S. Browning
Last week’s stock rebound was so sharp you could carve your holiday turkey with it.
The Dow Jones Industrial Average plunged 890 points in seven trading days, then regained 736 points in the next three. At Friday’s close it was at 17804.80, less than 1% from its Dec. 5 record.
The snapback reflected investor confidence that the U.S. economic recovery is for real, that inflation will stay low and that Federal Reserve rate increases next year won’t end the bull market.
But the sudden rally may be hard to sustain. It was driven partly by the fact that many mutual funds have risen less than the big indexes. Some money managers are desperate to boost performance, so they won’t look bad compared with the S&P 500. Some are pumping available cash into stocks they think will rise faster than the market.
“If you are among the 85% of money managers behind the S&P 500, this is a chance to catch up,” said Jack Ablin, chief investment officer at BMO Private Bank, which oversees $68 billion in Chicago.
Because some of that investing is short-term, the danger is that managers could shift some money elsewhere early next year.
Something like that happened this year, when the Dow fell 7.3% in January and early February, before rebounding to a record high in April.
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http://www.bloomberg.com/news/2014-12-21/age-of-plenty-seen-over-for-gulf-arabs-as-oil-tumbles.html
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