For stock investors, so far in 2013 it has been a good year, even with
some panic attacks along the way.
The Dow Jones Industrial Average was up 2.27 percent in the second quarter but has soared 13.78 percent so far this year.
The S&P 500 jumped 2.36 percent in the quarter, and increased 12.63 percent since Jan. 1.
The Nasdaq composite was up 4.15 percent in the second quarter, and rose 12.71 percent for the six months.
The Dow, which ended the quarter on Friday at 14,909, closed above 15,000 for the first time in early May as good economic reports and solid corporate earnings helped ease investor concerns about another economic slowdown.
That milestone came just two months after the Dow recovered the last of its losses from the financial crisis. Six years had passed since the Dow closed above 14,000 for the first time.
The Richmond Index, which includes the stocks of 17 companies with headquarters in the Richmond area, rose 2.73 percent in the second quarter, but soared 14.03 percent so far this year.
Local investment advisers and market observers are maintaining a bullish outlook for equities in the second half of 2013.
Yet, they say, the market's performance may depend a lot more on how well investors think the economy can fly on its own, and to what extent the Federal Reserve Bank's actions will nudge it out of the nest.
"I think ideally what the stock market bulls would like to see is an economy that is growing just fast enough to add jobs, but not too fast to force the Fed to end its quantitative easing (stimulus) program," said Steve Marascia, director of research at Capitol Securities Management in Henrico County.
After hitting new highs in May, the markets went haywire whenever the Federal Reserve made overtures about ending the quantitative easing program, also called QE, which involves buying $85 billion a month in Treasury bonds and mortgage-backed securities to keep interest rates low and stimulate economic growth.
Markets have managed to rise this year despite some bouts of "QE3 mania," said Kent Engelke, chief economic strategist and managing director of Capitol Securities Management.
But the markets began dipping 10 days ago after Federal Reserve Chairman Ben Bernanke indicated the central bank would start phasing out the bond-buying program this fall if the economy continues to improve, and could end it entirely in 2014.
In the second half of 2013, "I believe the narrative is going to start changing from the QE mania," Engelke said. "I will argue that the market is in the beginning of a transition from one that is driven by monetary policy to one that is driven by growth."
"Yes, it is going to be a scary transition," he said. "When someone takes the training wheels off the bike, it is scary, and it may be paralyzing at first, but once confidence is discovered, the new freedom you have is incredible."
The Fed has indicated it plans to hold short-term interest rates near zero as long as the unemployment rate remains above 6.5 percent. The jobless rate for May stood at 7.6 percent. June's rate will be released Friday.
In the second half of 2013 "economic activity and earnings will drive stock prices," said Jamie Cox, managing partner at Harris Financial Group in
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