4 Reasons to Buy Stocks in 2013
BALTIMORE ( Stockpickr) -- If you're not buying stocks right now, you're making a big mistake.
To a lot of investors, that sentence sounds crazy right now -- especially after the S&P 500 has already managed to rally close to 14% in the last year, and the big index posted its best January since 1997. Is there still any more room for stocks to move up in 2013?
The short answer is a resounding "yes," and I've got four reasons why.
Back in October, I wrote a "slightly bullish" article called " Dow 55,000? It's Closer Than You Think . Now, mind you, October wasn't that long ago, but sentiment was very different from what it is now. Investors absolutely hated stocks. Most of the comments on equities were about why the next 2008 was right around the corner.
Now, though, while most investors still hate stocks, they hate them because "everyone else" loves them and because this rally is unsustainable. Which is it?
Make no mistake: Equities can certainly move higher when sentiment is squarely against them, especially in prolonged low-volume conditions like we're in right now. That's not a contrarian signal, however. It's a signal that a new trend is in force.
So why should you buy stocks in 2013? Here's the executive summary.
1. You Don't Have Any Other Choice
The biggest reason to buy stocks is the one that's hidden in plain sight: You don't have any other choice right now.
Following 2008, investor anxiety has been ramped up. It's kept investors out of the market long enough to miss out on approximately $200 billion in stock gains according to Bloomberg, and it's getting old. No matter what investors may think about stocks, in a society in which retirement plans are wholly dependent on the capital markets, enough people are realizing that stocks are still the only option.
Why? Because you can't fight the Fed.
Ben Bernanke may talk about using Fed tools to encourage investors to buy stocks, but what he doesn't say is that he's doing it by turning the screws to investors with money in (almost) every other asset class. With interest rates pressed as near to zero as possible and inflation far from zero, we're in a toxic environment for the risk-free assets that investors have been flocking to for the past five years.
The question now is just how much principal investors are willing to lose in treasuries (or see flat-lining in most other fixed income investments) before they can stand staying away from stocks.