With a new year under way, stock investors have a lot to think about. so The Gazette asked three Emporia financial advisers to weigh in about how the market did in 2006 and what to watch for in the year ahead.
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Tracy Edwards
Company: Ameriprise Financial Services
Experience: 10 years
How did the market do in 2006?
“2006 was above average, mostly due to the fourth quarter. It was better than anticipated at the beginning of the year because 2005 was relatively flat. International stocks were much better than domestic stocks and with good reason. It’s hard for an economy as big as ours to grow at a 5 or 6 percent rate while some of these countries are growing at 20 to 30 percent.”
What sectors do you expect to be strong in 2007?
“We’re expecting continued economic growth and corporate profits, but at a slow pace. That in and of itself is a good thing. It means we shouldn’t be afraid of inflation from an overheating economy and it’s not a declining economy. Stocks remain attractive for 2007 ... We do have a preference for the large-cap stocks, which have underperformed for a while now. Studies are predicting that we could possibly see them outperforming the low to mid-caps. We still recommend overweighting on international ... and increasing weighting in technology, especially the mega-blue chip software companies, which are undervalued. They (Ameriprise) also like wireless telecom.”
What should investors be wary of?
“The same thing they ought to be wary of in any year. Where I have a strong passion as an adviser is in helping my clients focus on three things ... the right mindset, proper diversification and rebalancing their portfolio on a regular basis to match their risk level and take advantage of market conditions. I don’t stress being overly reactive or overly predictive. When either of those two become your main motivation, you’re no longer an investor. You’re a gambler. ... Don’t be afraid of downturns. I encourage my clients to welcome them. Use them as an opportunity to buy low.”
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Todd Osborn
Company: Raymond James Financial Services
Experience: 20 years
How did the market do in 2006?
“Actually, it was a pretty good year. Not everyone remembers, but in the middle of the summer, we had a big sell-off that made a lot of people nervous. But then we really finished out the year well. The market broke 12,000 and we haven’t gone above that mark in five or six years.”
What sectors do you expect to be strong in 2007?
“Jeremy Siegel had a book recently called ‘The Future for Investors: Why The Tried and True Triumph Over The Bold and New.” He recommended three trends. First, dividends are suddenly back in vogue. ... If the market goes down, the attraction of dividends gets even better and it’s a nice retirement.
“The second is value investing -- measure up the stock you’re interested in and only buy when it’s cheap. The third is international. If you look at all the stocks out there, 50 percent of the market capital is outside the U.S. But most of the attention is on developed nations.
“Very few go into owning stock from places like China, Brazil or Russia because it’s very volatile.
“But I think everyone’s starting to wake up to the fact that it is a global marketplace. Most of the large U.S. companies are really global companies and most of their products are really international products.”
What should investors be wary of?
“The hot tip. The growth tip. Most of the people I work with are very cautious in investing, ... Professionals say your investments need to continue to grow. People are living longer and inflation still eats away at investments. So instead of sitting on CDs and a fixed income, they need to continue to invest in stocks for growth for the long run.”
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Jon Geitz
Company: Edward Jones Investments
Experience: 9 years
How did the market do in 2006?
“2006 was an above-average year. The one thing that was probably unique about last year was there was very little variability, not huge swings up and down. It was pretty steady throughout the year.”
What sectors do you expect to be strong in 2007?
“We don’t recommend people go after hot investments. ... The best thing is to be diversified with a little representation in all sectors, instead of chasing a hot sector. ... Over the last few years, the energy sector’s done well, but I don’t think the big advances will continue. ... Financial is another sector that has done well.
“And international stocks have done very well over the last couple of years.
“Historically, the international markets zig when the U.S. markets zag and that really came into play after Sept. 11.
“But I don’t have a crystal ball. If anyone tells you they do, turn and run in the other direction as fast as you can.”
What should investors be wary of?
“I would be wary of chasing hot returns. I would be wary of fads. For example, in the last two to three years, there’s been a lot of ethanol companies coming up, but that industry’s still very young.
“Who knows where any of them will be 10 years from now?
“It was the same way in the late ’90s with technology companies — a lot of companies came out and five, 10 years later, most of them are nowhere to be seen.”