Investors Beginning to Return to the Stock Market

Originally published on Washington Post, February 3, 2013.

Five years ago, in the midst of the recession, Jeff Leventhal’s clients began pulling their money out of the stock market. Many of them were area entrepreneurs who wanted to focus on their businesses instead, he said.

Today, that’s changed.

“Now they’re saying, ‘Oh, maybe I made a mistake,’ ” said Leventhal, a Bethesda-based partner at the financial services firm High­Tower. “People are saying, ‘We have this cash that’s been sitting aside post-financial crisis, and we want to put it back into the stock market.’ ”

Across the country, Americans are embracing riskier investments that they shunned in the aftermath of the financial crisis. The Federal Reserve has pledged to keep interest rates near zero for at least the near term, and that is keeping bond yields low and leading investors to look for better returns.

Many local brokers and money managers say they are seeing renewed interest in stocks, which is pushing markets higher. Others say their clients never fully left the market, but are trading more frequently now and investing larger amounts of money.

“We’re seeing people who had money in bonds now more willing to put their money back in stocks,” said Kate Warne, an investment strategist at Edward Jones. “People aren’t concerned about the ‘fiscal cliff’ anymore. There isn’t as much bad news out of Europe. They’re starting to feel more comfortable.”

Stocks have been on the move of late. On Friday, the Dow Jones industrial average closed above 14,000 for the first time since the financial crisis hobbled the global economy. Meanwhile, investors funneled $55 billion into U.S. equity funds in January, the most ever for any month on record, according to data from TrimTabs Investment Research.

TD Ameritrade, the Omaha-based online broker, registered an average 370,000 trades per day in January, up from 330,000 trades a day in December, said Steve Quirk, senior vice president of trade for the company.

“The clouds are starting to part,” he said. “People have been waiting — not very patiently, but they’ve been waiting — for some good news. Now they’re saying, ‘Hey, the water is safe. Let me get back in.’ ”

Even so, there are signs that the stock market rally may not be backed by broader economic growth. The U.S. economy unexpectedly shrank during the fourth quarter of 2012, according to data released last week by the Commerce Department.

As a result, Quirk said, most investors are taking the economy’s broader movements into account and are cautiously reentering the markets.

Investors “don’t just wake up one day and decide, ‘I’m going to buy a whole bunch of stocks and get back into the market,’ ” Quirk said. “What we’re seeing is that they log in, do their research, get poised for an opportunity — and maybe within a month, they’ll pounce.”

Some area investors, though, say the market’s rapid run-up is making them think twice about jumping into equities.

“I am putting more money into options and futures,” said Tammy Bagnato, 47, of Arlington. “This is really not the right time to get into the market, when it’s having a good run. At the very least, I’ll wait for a fallback.”

At the Online Trading Academy, which offers day-trading workshops in Tysons Corner, enrollment has been on the rise.

“Has it been a dramatic increase? No, but we have seen more interest over the past six months,” said Jessica Simonetti, operations manager.

Simonetti said demand tapered off during the recession. When people did attend workshops, they were more interested in learning about trading futures and foreign currencies than stocks.

“Most people were just waiting to see what would happen,” Simon­etti said. “We’ve just begun to rebuild.”

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