Elizabeth Lilly: Underlying all this, don’t you think that the average investor still gets their 401(k) statement every quarter … and they’re still like “OK, oh good. I’m back to even.”
Q: With stock indexes at near-record levels, has the market gotten ahead of the economy?
Carol Schleif: The market is supposed to be ahead of the economy, that’s why it’s the leading economic indicator.
David Joy: I don’t think stocks are in a bubble. I think your readers are probably hearing this every day, or at least the question. I don’t think it’s a bubble, I think valuations are elevated but justified where they are. But in order for them to go higher, the economy has to continue to improve.
Erica Bergsland: Clearly we’re paying more for stocks today than a year ago. That means that prospective returns are probably going to be lower than they were a year ago. But saying that, interest rates are still very, very low and people have to put their money somewhere.
Jim Paulsen: I think our biggest risk is inflation. And if it happens and it gets out of control, we have to prematurely shut down the cycle, early. But if we keep that original control, 4 percent or less, we’re probably not even halfway through this recovery in the economy or the markets. And the reason is because of the shock that hit all the players.
Q: The end of the year is a good time for everybody to look at their portfolios and to rebalance, especially given the last year. Which areas and what sectors are looking most attractive?
Russell Swansen: I would say we are favoring large-company stocks over small-company stocks because of the valuation comparisons. We’re favoring large European multinationals, which in many ways look a lot like domestic companies. Nestlé for example, many people would probably be surprised that that’s not a U.S. company. The valuations there are lower than on U.S. stocks.
Elizabeth Lilly: I would say health care. A trillion dollars is going to be spent on Obamacare over the next 10 years trying to comply. So within health care, you’ve got hospitals, insurance companies, which are going to be big beneficiaries. I think we’re in the midst of a huge property and plant equipment spending cycle that is going to benefit this country because we’ve underspent. And aerospace, a lot of aerospace suppliers are going to benefit from what’s going on with Boeing and Airbus. And then I would say energy.