Is It Time to Buy the Dips with ETFs?

U.S. stocks are making a furious comeback on Thursday following the previous session’s decline, the worst of 2012 so far. Many investors are asking themselves if now is the time to buy the dips if we are in a sustainable bull market.

Before last week’s slight setback, the S&P 500 had advanced five straight weeks, the longest rally in more than a year, reports Inyoung Hwang for Bloomberg Businessweek. Meanwhile, the Dow recently hit its highest level since May 2008. [Is Bullish Sentiment A Warning Sign For Stock ETFs?]

“People were thinking the issues in Greece were nearing resolution, and now it looks as far off as ever,” John Carey, a Boston-based money manager at Pioneer Investments, said in the report. “You still have that uncertainty overhanging the market. People may be taking more of a wait-and-see approach again.” [Fourth Quarter Earnings Lift Stock ETFs]

Large-cap ETFs such as SPDR S&P 500 (NYSEArca: SPY) and SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) are enjoying a fast start to 2012. [ETF Portfolio Shifts Reflect Risk-On Trade]

The European debt crisis took the S&P 500 down 19% between April and October 2011, but the index has risen 22% since then, reports Hwang.

“It’s important to get cash off the sidelines and back into the markets so people can get the returns they need and we can get our economies moving again,” Larry Fink, chief executive of ETF and asset manager BlackRock, said. “Too many people are underweight equities, and one of things I’m trying to do is to get people to think about the opportunities they’re missing, with valuations at these levels.” [Fink Touts 100% Stock Exposure]

Many are wondering if it’s too late to get back into equities after the strong rally. Yet after a volatile market in 2011, some bullish trends may be just getting started. The Federal Reserve’s promise to keep interest rates low has helped, along with the positive U.S. economic data reported recently. [U.S. ETFs See More Inflows]

SPDR Dow Jones Industrial Average ETF

dow-etf

Tisha Guerrero contributed to this article.

Full disclosure: Tom Lydon’s clients own SPY.