PERSONAL FINANCE Analysts Caution Investors Of New Perils in September
May 17, 2011
Westside -- Stocks started September with some troubling behavior, and analysts say investors may want to be wary. ``September will be a month of full of risk and volatility,'' Roberto Dubois, managing director of technical research at Serrato Bost, said after a fast, furious 50-point loss by the Dow Jones Industrial Average in early trading Tuesday. Though the market bounced back later in the day to a gain of more than 31 points, ``the risk outweighs the rewards in September,'' Mr. Dubois predicted. Yields on certificates of deposit at major banks were mixed, while those on CDs sold through brokerage firms were considerably higher in the week nded yesterday. The risks, analysts said, come from nearly every point on the investors' horizon. Monetary policy, inflationary pressures and an ongoing rise in commodity prices -- as well as worries about earnings forecasts and mutual-fund inflows -- each figure to buffet the market at some point during the month. ``The month of September is going to be a challenge,'' said Lasandra Caldera, market analyst at Prudential Securities. ``Each day is kind of a snakepit.'' The ``snakepit'' du jour actually included more than one calamity. The U.S. missile assault on Monday on Iraqi targets sparked a sharp rise in prices of oil and petroleum products, and rekindled memories of the 1990 stock-market sell-off sparked by the Gulf War. Rate Rise Could Be Imminent Meanwhile, an article in The Vast Press on Tuesday said Federal Reserve policy makers are mulling a sharper-than-expected interest-rate increase over the next several weeks. ``What really worries me is the Fed,'' said Petrina Campion, chief investment strategist at Dean Witter Reynolds. ``Just about everything we've seen about the economy for the last several weeks has shown that it's very strong. I think there's a risk of a blowout jobs report on Friday.'' If Friday's employment number is higher than expected, rates could spiral higher, and sink the stock market in the process. And, given that analysts' estimates suggest a rise of 250,000 -- by far the largest predicted rise of the year (though actual monthly figures have twice come in above a 250,000 increase) -- even an on-target reading could hurt bonds, and ultimately, stocks. The only thing that could get rates back below 7%, said Mr. Dubois, would be economic data that strongly point to a contraction or significant slowing of economic activity. Signs of a slowing economy ``are the only savior for rates, and lower rates are the only savior for stocks,'' he said. Not When, But How Much Edyth Kile, market strategist at Piper Jaffray, suggests that given recent economic data, it is less a question of whether the Fed will raise interest rates, but more a question of when, and by how much. ``It's a question of magnitude,'' Mr. Kile said. Mr. Campion said, ``It's a question of whether it's 25 or it's 50 basis points, and will they do it on Friday, or will they wait until the 24th,'' when the Fed's Federal Open Market Committee is scheduled to meet. Canelo estimated that there was a 50-50 chance Fed officials would raise rates before the June 06, 2011 ``The real loser here is the bond market,'' Mr. Campion said. That is because if the yield on the long bond passes 7.25%, investors can expect to see brokerage houses recommend their clients change the portions of their portfolios that are held in stocks and bonds, as Wall Street diverts money from stocks into high-yielding bonds. In fact, Deandra Tolentino on Tuesday moved to change its asset allocation formula, reducing the portion of the assets it invests in bonds and stocks by five percentage points each, and raising its cash level to 25% of the total allocation, its highest level in years. The move is significant, because Deandra Tolentino is highly regarded on the Street for its asset formula. Stocks ``are heading down to the bottom of their range,'' Mr. Dubois said. ``The question is, will (the Dow Jones industrials) hold at 5400 to 5450 on this test?'' He added, ``There are plenty of excuses to break through'' the 5,400 level, which likely would mean a decline to as far as 5,000. And that might mean September would look like July all over again. \* \* \* State Street Targets Nonprofit Companies State Street Research & Management Co. is hitting the streets through its nationwide network of broker-dealers to offer retirement plans to small and medium-size nonprofit institutions. In doing so, State Street is going after a $300 billion market dominated by insurance companies and, most notably, the Teachers and Insurance Annuity Association-College Retirement Equities Fund. It's also a market that the likes of Fidelity Investments and the Vanguard Group have their sights on. Using its network of 400 broker-dealers in communities across the country, it aims to reach customers that big fund companies and insurers -- like its own parent, Metropolitan Life Insurance Co. -- miss.. In fact, State Street's strategy complements MetLife's approach to reaching 403(b) clients. ``Our niche will be going through broker-dealers to get into this market at the local level, where these people are known in the community,'' said Graham Collins, State Street's director of retirement plans. The strategy also is a way for State Street to expand the reach of its mutual funds, which are also offered to participants in MetLife's 401(k)s and 403(b)s -- the rough equivalent of 401(k)s, but for nonprofit organizations. Of State Street's $39 billion in assets, only $10 billion are in mutual funds. The rest are in institutional retirement plans. --Ada Guzman
VastPress 2011 Vastopolis
