For investors who came of age after 2000 there's been only one way to make and keep money in stocks: Trade. Buy panic, sell fear. Lather, rinse, repeat. At least for the moment, 2012 has marked the rebirth of "buy and hold." Don't take gains, don't be afraid to chase, and for the love of all that is holy don't get short.
This placidity hasn't been lost on options traders who've seen the CBOE Volatility Index (^VIX) collapse over 60% since October and 20% just since the year began. If the stock market's job is to confuse the most people at one time, Mr. Market can string up a Mission Accomplished banner for its work so far this year.
Tim Speiss, a VP with EisnerAmper Wealth Management says volatility isn't dead, it's just hibernating. "The world remains a complicated place," Speiss notes, ticking off the decline of the EU, budget gridlock in the U.S., and the ever-present geopolitical risk as unfinished business from 2011.
Speiss isn't one to sweat the fear, or even wait for it to emerge to try to get the lowest possible entry point. He advises his clients with a a greater than five-year time horizon to stay allocated in the manner best fitting their goals. While obviously aware of the headwinds, Speiss is focused on how much better corporate balance sheets have become in recent years, waiting for confidence to create a long-awaited virtuous cycle.
Stepping away from emotion and looking at companies both here and abroad Speiss wants to know "when are they going to start hiring again to drive greater economic valuation increases?" In English, when will global corporations start growing their businesses instead of hoarding cash and waiting for an all-clear signal that's never going to come.
Regarding stock valuations as attractive and not expecting the world to get less complicated, Speiss suggests clients stick to their knitting and invest in a way that makes sense to them. "Everyone's psyche is not the same," he says, and neither are their goals. That being the case get positioned for the long-term now and buckle up before the market snaps out of it's daze and resumes its dance between greed and fear.
Are we in a temporary holding pattern or is "benignly higher" the new M.O. for equities? Drop a comment in the space below and tell us how you're playing 2012's tranquility.