U.S. economic improvement, housing market stability and strong corporate profits have contributed to the stock market’s solid performance in 2012 as the Dow Jones Industrial Average hits a four-year high, said Charles Schwab’s chief equities investment strategist on Friday.
“It’s an amazing start to 2012,” said strategist Omar Aguilar during an “Every Third Friday” exchange traded funds conference call. “Equity investors seem to be forgetting everything that happened in 2011.”
Since January, the Dow has been nearing the psychologically important benchmark of 13,000 points (on Tuesday, it crossed the barrier before retreating). Last week, the Dow closed near a four-year high as it completed more than a month without any triple-digit declines, for the longest such run in over a year.
In addition to the solid economy, Aguilar pointed to central bank support of Europe along with investors’ search for yield, saying Schwab is maintaining a “cautiously optimistic” stance on stocks. “The search for yield has transitioned to a demand for risky assets,” he said, adding that Europe remains a wild card. “We don’t know the source of outcomes for Europe. That’s the big risk.”
Aguilar added that Schwab recommends emerging markets growth as an offensive play. “It’s the only area that potentially will give us growth rates that we don’t see in the developed world,” he said.