Stocks Climb to Multi-year Highs but Trading Volumes Stay Low

GHARIB: Aside from today’s minor losses, the stock market has been on a steady climb up. The S&P 500 has rallied more than 9 percent this year. But as Erika Miller reports, trading volume has been very light,
suggesting many investors are missing out on the gains.

MILLER: Even as stocks trade close to their highest levels in two
years, many individual investors are still wary. Mutual funds are the most
common investment for individual investors and looking at the latest data,
$2 billion was taken out of U.S. stock mutual funds in January. At the
same time, bond funds gained nearly $28 billion. What that shows is that
the market rally has been based on light trading volume, often a troubling
sign. But analyst David Lefkowitz says volume is just one of many factors
investors should consider.

DAVID LEFKOWITZ, SR. EQUITY STRATEGIST, UBS: Volume is one of them,
but looking at trends in earnings, we’re still going to have earnings
growing this year. So that is a positive. In fact dividends this year are
going to grow faster than earnings.

MILLER: Here at the New York Stock Exchange, many professional
traders are feeling optimistic as the Dow climbs to levels last seen in
2008. So why aren’t individual investors feeling the same way and flocking
back into stocks? Jonathan Corpina warns there’s no simple answer. He
believes some investors are simply waiting for a better entry point.

JONATHAN CORPINA, SR. MANAGING PARTNER, MERIDIAN EQUITY PARTNERS: One
of the reasons why investors haven’t gone into the markets so heavily thus
far is just because the market has been pretty much one direction since
December. When that happens sometimes investors feel like they’ve missed
the opportunity.

MILLER: Other investors may be worried about the weak job market and
fragile economy, so they’re saving more and investing less. The surge in
prices at the pump may also be having an impact, by forcing some people to
dip into long-term savings to pay for extra household expenses. But there’s
no denying many investors are reluctant to buys stocks, after getting
burned by the financial crisis.

CORPINA: There are investors who are saying I’ve gotten so hurt in
the past, it is going to take a lot more for me to get back into this
market.

MILLER: It’s understandable that many investors want to play it
safe. But historically, individual investors tend to be poor market timers
— cashing in near the bottom and buying back in near the peak.
Erika Miller, NIGHTLY BUSINESS REPORT, New York.


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