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June 12, 2013 at 06:01 PM
Is it just your clients who missed the huge stock market rally?
Apparently not, judging from a fund research round table that included top Morningstar analysts Scott Burns, Russel Kinnel, Laura Lutton and John Rekenthaler.
In a free-flowing discussion that is a highlight of each year’s Morningstar Investment Conference, the Chicago-based research firm’s top analysts answered questions from PBS business journalist Consuelo Mack.
Self-defeating behavior on the part of investors was a theme that came up early and often on the late Wednesday panel.
Burns (left) called it “confounding” that a huge segment of investors have not participated in the stock market rally, describing the heavy flow into fixed income as a “retroactive fix” of a bad asset allocation that overweighted stocks prior to the financial crisis.
Rekenthaler’s formulation packed more pain:
“You don’t get too many chances to get over 100% gain without inflation after only four years,” he said, adding that huge numbers of investors compounded the woe of missing the rally by heading for the exits after locking in portfolio losses in 2008 and 2009.
Conversely, Lutton worried about latecomers to the rally, saying “investors chasing performance doesn’t end well historically. Those who see bonds as safe investment are going to be unhappy.”
And Kinnel noted the danger in the investor quest for yield.
“Whether you’re looking at funds, bonds or stocks…the highest yielding areas…are a little scary right now.”
Missing the rally and coming to it late, with all the dangers that entails, made investment strategy another dominant theme in the discussion.
“This fall it will be five years since [the collapse of] Lehman Brothers,” Burns noted, “but people talk about it as if it were five weeks ago. The scars are still so deep.”
