Given the stock market's volatility so far this year — the S&P 500 fell 3.1 percent in January and has rebounded 4.2 percent in February — you might be tempted to give up on equities.
But don't lose hope, says
MarketWatch columnist Jeff Reeves. He thinks stocks will continue their six-year bull market and offers several reasons why.
- "Corporate earnings are robust," Reeves writes. "Despite fears of a fourth-quarter 2014 earnings disaster, FactSet reported last week that 78 percent of the S&P 500 companies reporting earnings thus far have exceeded the average profit forecast."
- Short sellers are failing. Last week, the 50 stocks in the Russell 3000 with the largest short interest soared, gaining about 6 percent in just a few days, according to Bloomberg.
- "Consumers are confident." In January, the Conference Board's consumer confidence index rose to its highest level since August 2007.
- "Interest rates will stay low for longer." Economists' consensus is that the Federal Reserve will begin raising interest rates around mid-year. However, he believes that "no significant change in policy is around the corner."
"There is surely a lot of money to be made via well-timed swing trades in specific stocks, but don't let the volatility of January fool you into making big bets to the downside that you'll regret. After all, the vast majority of investors are best served by keeping their eyes on big-picture trends."
Legendary investor Bill Miller, manager of the Legg Mason Opportunity Trust, likes stocks too.
"I think they're fairly valued," he tells
CNBC. "They're cheap compared to bonds. It makes no sense for the stock market as a whole to yield more than the 10-year Treasury, unless we're going into a recession, because dividends are going to grow."
The S&P 500 index had a trailing price-earnings ratio of 20.03 Friday, up from 17.08 a year ago, according to Birinyi Associates. The index yielded 1.98 percent, compared with 1.95 percent for the 10-year Treasury.
Miller said the strong January jobs report issued last Friday may point to an end for the 33-year-old bond market rally.
"If that's the case, then the outlook for stocks is much better, just as we saw in 2013 when the bond market sold off on that taper tantrum. It sent stocks soaring. That wouldn't necessarily be a good thing if stocks go [rise] 20 or 30 percent."