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Climbing the wall of worry

Greg Heberlein
Greg Heberlein

Should you pull out of the stock market?

Standard & Poor's downgraded its credit outlook for the United States this week; gas prices are rising; Europe is facing serious debt problems and Japan continues to struggle with its nuclear crisis. There's an awful lot to worry about these days.

But financial commentator Greg Heberlein reminds us that Wall Street climbs a wall of worry, and says you should stay in the market and look for buying opportunities.

Greg's analysis:

  • Since the stock market has nearly doubled in two years, some might think a significant downturn may face us. But look at it this way – that drop was a giveback to earlier, better times. If the nation’s economy is recovering, the market’s comeback may be just beginning.
  • Corporate profits continue to hit records, but many stocks need big gains to reach all-time highs.
  • When the market is overheated, price-to-earnings ratios soar. With so much going right, are the ratios skipping to bubble levels such as 25 or more? Not even close. The Dow Jones industrial average’s P/E is 15, dead on its historical average. That suggests the market could go either way. With that wonderful wall of worries, one would expect any downturn would be brief.

This isn’t a call for market timing. It is obvious many individuals pulled their money out of the market from 2008 to 2010. Now wouldn’t be a bad time to average your way back in – put a reasonable share of your cash into stocks on a monthly or quarterly basis. Don’t risk it all at once. Avoid the big losses.

Dave Meyer has been anchoring KNKX news shows since 1987. He grew up along the shores of Hood Canal near Belfair and graduated from Washington State University with degrees in communications and psychology.
Greg Heberlein spent 32 years at The Seattle Times. In 12 years in the Sports Department, he was the only reporter to cover every game in the Seattle SuperSonics' championship season. Towards the end of his 20 years in the Business Department, an award was established to honor the Northwest's top business columnist. He won in each of the first three years and shortly after, wisely took early retirement.