Melkonian: Artificial support for stocks
Martin Melkonian, an economics professor at Hofstra University, warned that the Federal Reserve's zero-interest-rate policy is providing artificial support for stocks.
Low interest rates on bonds have forced portfolio managers to move into stocks, he said, bidding up prices. "As a result, the market is hitting new peaks, but it's not based on a firm foundation," he said.
Though the Labor Department reported the economy added 288,000 jobs in June, real wages adjusted for inflation remain stagnant, said Melkonian, 78.
At the same time, "we're seeing a fueling of the stock market through this monetary policy that at some time has to be reversed." Once the Fed ends its easy-money policy, interest rates will climb, he said, and investors holding medium- and long-term fixed income investments could take a beating.
But higher interest rates ultimately will prod portfolio managers to shift money into bonds, he added. "You'll see a lot of traders bailing out of the [stock] market."
Driscoll: The best time for market confidence
Michael Driscoll, an assistant professor of finance at Adelphi University believes that the best time for confidence in the stock market is when most investors are skeptical.
Driscoll, 53, said that fears widely expressed by analysts that the market will "correct," or fall back, after the Dow reached a record high of 17,068 Thursday are actually a reason to be assured that the market will continue its rise.
"Most people want it to pull back, that's reason enough to think that it's going to march higher," he said.
Driscoll said he has lost money whenever he has tried to hedge against a market pullback in the past three years in his personal investments.
People with assets that want higher returns will continue to take risks in the equity market as interest rates on bonds remain low, he said.
Stocks, he said, "are the only place that offers a return for those with capital."
Muñiz: Seeing a 401(k) boost
Ruben Muñiz, 66, a self-employed Mastic resident, estimates that the surging stock market has boosted his 401(k) by $100,000 in the past year.
"That's like having two people working for you full time and giving you their paycheck," said Muñiz, who owns the retirement account with his wife, Emee.
They set up the account with $25 in 1988, when she worked for the former Long Island Lighting Co. Before she retired, they invested a lot of her weekly check and any raises she received into the 401(k) and lived on his salary. Muñiz, who with his wife owns travel business Family Fun Cruises and Tours Inc., prefers stock funds rather than individual stocks. He invests in a number of Vanguard funds. He feels a stock market correction is coming, but doesn't fear it.
"That's the opportunity to buy more because the products are on sale," he said.
Cohen: A record that has drawbacks
Great Neck resident Bernard Cohen, 70, has ridden the market down and back up again. He estimates that the bull market has lifted the value of his stock index funds 50 percent to 60 percent since 2009, when the Dow had plunged below 7,000. Earlier, his holdings lost 30 percent of their value, he said.
Those memories make him somewhat cautious. He has invested 65 percent of his money in stock funds and 35 percent in either bonds and cash. "I don't have the stomach for individual stocks," said Cohen, a retired adult vocational counselor.
And he believes the record-setting Dow has its drawbacks.
"It's not a bargain anymore," he said. "You have to be careful of what sectors or markets you are buying into now and how much you are risking."
Purisch: A correction she can live with
Joan Purisch, 70, a retired medical technologist, has 30 percent of her money invested in the stock market and the rest in less risky things such as certificates of deposits and annuities. The Valley Stream resident wasn't sure how much she has made in the record-setting market in the past year. And she admits that the market, especially individual stocks, makes her a little queasy ever since she lost $1,000 on an investment in the stock of a computer graphics company about 15 years ago. These days, her broker keeps tabs on her investments, which she said, "I just kind of ignore."
She believes a correction is coming but she is hoping it is one she can live with.
"I think it will be swaying and forth but no massive movements," she said. "At least I'm hoping that's the way it will work."