Stock Investing: How Should Investers Proceed In 2011

Happy Anniversary, Investors!

One year ago this week, on March 9, 2009, the Standard & Poor’s 500 hit a 12-year low of 672.88 as it reached its lowest point during the most recent economic recession. Since that time, the S&P 500 is up 69%. The Dow Jones Industrial Average and the NASDAQ, of course, witnessed a similarly resilient rebound. Black Enterprise called on a handful of financial experts to find out why the market has bounced back so powerfully, whether the rally can continue, and how investors should proceed in the coming year.

Wayne P. Weddington III, portfolio manager and managing partner at Brunswick Capital Partners. Author of Do-it-Yourself Hedge Funds (Hachette; $24.99).

The reason for the rally:

I think a lot of the market activity in the last 12 months has been speculation. We’ve also had a tremendous collapse in market fundamentals. I am personally one of the people that think it is overshot. There is a lot of uncertainty in the market. We have a lot of exogenous activity.

The word on the street [is] that people have really been trading technicals because the fundamentals haven’t really taken strong direction. [This means people are buying] more in terms of price action. If you are a speculative investor, the market rallies and you want to participate and it becomes a self feeding proposition. No one wants to be [the one who didn’t get in on the market action].

Predictions for the coming year:

The Fed … knows interest rates will increase. They are walking a very delicate line. Rates will continue to inch up slowly as they get evidence that the economy is [improving] I think what they did do was truly avert a [crisis].

Advice to investors:

Buy on a sector basis. Some of them make fundamental sense. Capital goods will continue to perform. Technology will continue to market perform or better because even in difficult economic times people still want their iPods. Consumer noncyclicals will continue to perform. It has been a standout at about 22%. To short the market against it would be a profitable trade.

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