Why Stocks Have Lost Their Luster With Some Investors
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Here's your money briefing for Thursday, March 9th. I'm J.R. Whalen for The Wall Street Journal. Stocks typically top the list of investment options, be it for professional investors or someone trying to boost their personal finances. But recently, many on Wall Street are looking elsewhere.
There's a lot of worry about when the economy is going to go into recession and how bad that potentially might be.
On today's show, we'll talk to Wall Street Journal markets reporter Akani Ohtani. That's after the break.
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For years, investors have held on to the belief that there is no alternative to stocks. But after last year's series of sell-offs and this year's choppy market performance, investors are seeing money market opportunities outside the stock market. WSJ Markets Reporter Akani Ohtani joins us to discuss how you can take advantage of these alternatives to stocks to build up your portfolio. Akani, thank you so much for being with us.
Thanks for having me.
Why are some investors losing confidence in stocks after recent market swings?
So, Akani, you know, we saw stocks take a beating last year to the tune of a 19% decline in the S&P 500. Then they got a bit of a bounce at the start of this year. But what's gotten us to the point where investors at all levels should be thinking about alternatives to stocks?
Well, JR, I think there's two main factors driving that shift in mindset. One is the fact that there's a lot of worry about when the economy is going to go into recession and how bad that potentially might be for corporate America. As we know, the stock market does heavily tend to rely on corporate earnings. So there's this thought that if we go into a downturn, other markets might offer investors a bit more of a chance at a safe return than the stock market. And then the second factor is the fact that interest rates have continued to rise. We know that the Fed intends on raising interest rates at least a couple more times this year. And that means that other assets like bonds, for instance, are offering investors a lot more yield for their money.
So take the two factors together and you have a lot of money managers saying stocks don't necessarily look like the best or the only market to be in right now.
But if stocks have come down in value, wouldn't it make sense to maybe jump in and grab a bargain?
You would think so. But a lot of money managers actually say the stock market, especially in the U.S., still doesn't necessarily look cheap. So, of course, yes, the S&P 500 had a terrible year last year. We saw big declines across the board and many of the most popular stocks in the market. But if you look at most sort of broad measures of stock, valuations or trying to figure out how expensive the stock market is. In general, we're seeing the S&P 500 trade above long term historical averages still. So it still looks more expensive than on average we've seen over the past decade. So that has a lot of investors thinking the risk reward ratio doesn't necessarily look super compelling right now.
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