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The stock market has been on a tear since the pandemic lows of March 2020. Even after a roughly 5 percent pullback in September, the S&P 500 index has essentially doubled from its low reached on March 23, 2020.
Experts generally expect that good performance to continue over the next 12 months, with the S&P 500 forecasted to increase 9 percent, according to Bankrate’s Third-Quarter Market Mavens survey of investment professionals. The increase, which is in line with long-term historical stock market performance, is expected to come in the face of rising treasury yields, the survey found.
While some survey respondents think a market correction, a decline of at least 10 percent, could be imminent, more than half of the experts don’t think we’re likely to see one immediately even though they think one is likely at some point in the next 12 months. Several of the experts stressed that market corrections should be expected occasionally and are normal parts of any economic cycle.
This article is one in a series discussing Bankrate’s Market Mavens third-quarter survey. We asked experts where stocks were headed in the coming year and in the next five years, and where investors might see the highest returns. We also asked them where the 10-year Treasury yield will go, the best places to invest $10,000 today and when to expect the market to decline.
How to invest $10,000 today: 4 ways recommended by the pros
We asked a number of top investment professionals where they would typically advise clients to invest $10,000 right now. Here’s what they said.
1. Long-term investors should stick with stocks, avoid bonds
Wayne Wicker, chief investment officer at MissionSquare Retirement, suggests investors with long time horizons stick with stocks. “If a client has a time horizon greater than three years, I would suggest a 100-percent equity portfolio,” he says. “Bonds will not earn their coupon over the next few years which further amplifies the advantage stocks have over bonds.”
Despite his positive long-term outlook for stocks, Wicker says a correction is likely in the next six months. But overall he expects the economy to outperform, driving earnings and stock prices higher over time, saying he’d view any correction as a “natural event.”
One popular way to own stocks is through an S&P 500 index fund, which is the investment recommended by Robert Johnson, a finance professor at Creighton University. These funds can be a great way to access a diversified portfolio for a low cost.
2. Keep your portfolio diversified to protect against a pullback
Not everyone is as bullish. Following a long stretch of above-average stock market returns, performance over the next five years is likely to be below historical averages, says Sam Stovall, chief investment strategist at CFRA Research. He also thinks a correction could be coming any day, noting that the market is overdue for a pullback.
So where should investors put their money? Stovall recommends a diversified approach. “When you don’t like anything, you have to own everything,” he says. “Investors should be broadly diversified among regions, styles and sizes.”
Some experts recommended specific asset allocations:
- James Iuorio, Director at TJM Institutional Services: 40 percent U.S. stocks, 30 percent international stocks, 30 percent dollar hedges (real estate, gold, silver, crypto)
- Clark Kendall, CEO at Kendall Capital: 50 percent mid-cap GARP stocks (growth at a reasonable price), 30 percent small- and micro-cap stocks, 20 percent international stocks
3. Look to value stocks
While most of the experts recommended U.S. stocks as a key component of where they’d invest today, some were even more specific, highlighting sectors, industries or investment styles they think are positioned to do well.
“The rotation toward value [stocks] will accelerate in the coming year,” says Mark Willoughby, a financial advisor with Janney Montgomery Scott. “Growth stocks have been generating exceptional returns and will cool somewhat. Investors will look to value stocks to provide comparable returns in their portfolio.”
For investors looking to be more surgical in their approach, Wells Fargo Senior Global Market Strategist Sameer Samana suggests cyclical areas that should outperform such as financials, industrials, materials and energy. Higher interest rates and commodity prices should benefit these value-oriented areas, he says.
You might also consider stocks outside the U.S. Kenneth Chavis IV, a wealth manager with LourdMurray, recommends investors look for relatively undervalued stocks with solid dividend yields around the globe. As the rest of the world starts to reopen following the pandemic, global stocks could benefit, he says.
4. Focus on technology stocks
Still, many of the experts think technology stocks are the place to be to capture future growth.
Willoughby suggests investors focus on technology and medical devices as areas that are likely to reward shareholders over time.
Kim Forrest, chief investment officer at Bokeh Capital Partners, also likes the tech sector and thinks some value stocks could outperform as demand for their products and services ramps up. Specifically, she thinks semiconductors will benefit from the continued rollout of 5G, which creates exceptional demand for the high-tech chips.
The most bullish of the survey respondents is Kenneth Tower, CEO and chief investment strategist at Quantitative Analysis Service, who sees the S&P 500 rising to 5,900 a year from now. He expects interest rates and inflation to be low and sees the market benefitting from “tremendous innovation.” He recommends investors buy a mixture of “crazy” high-priced growth stocks and more established growth companies.
Bankrate’s third-quarter 2021 survey of stock market professionals was conducted from Sept. 8-16 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Chuck Carlson, CFA, CEO, Horizon Investment Services; Patrick J. O’Hare, Briefing.com chief market analyst; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Tom Lydon, CEO, ETF Trends; Sam Stovall, chief investment strategist, CFRA Research; Kenneth Chavis IV, CFP, senior wealth manager, LourdMurray; Dec Mullarkey, managing director, SLC Management; Kenny Polcari, managing partner, KACE Capital Advisors; Clark A. Kendall, president and CEO, Kendall Capital Management; Kenneth Tower, chief market strategist, Quantitative Analysis Service; James Iuorio, managing director, TJM Institutional Services; Mark Willoughby, senior vice president, Janney Montgomery Scott; Robert Johnson, professor of finance, Creighton University; Wayne Wicker, chief investment officer, MissionSquare Retirement.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.