Analysis: Money managers forge ahead despite volatility

Wed Dec 21, 2011 11:38am EST
 
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By Caroline Valetkevitch

NEW YORK (Reuters) - It is a good time to be a U.S. stock investor for the long term - if you can ignore the noise erupting every few hours.

That is the advice from some money managers, who are taking the opposite tack of many who want to avoid the turbulence. Instead, they are confronting the volatility head on, adding to stock allocations rather than standing pat.

Much of their increased optimism stems from a belief the U.S. economy is likely to avoid another recession, even as a European downturn seems more likely.

Because of that, they believe the euro zone's debt crisis, which has kept the market on its toes for months, will recede as the main driver of market direction. A Reuters poll of 12 U.S. fund companies showed managers in December boosted equity holdings to their greatest percentage this year.

But for those worried investors who have been out of the market for a while, Shawn Kravetz, president of investment management firm Esplanade Capital, suggests starting small.

"You should start to deploy capital into the stock market gradually and, in the coming months if it's up, you keep doing it. If it's down, you get a little bit more aggressive," said Kravetz, who favors large retailers, including Lowe's (LOW.N: Quote), Target (TGT.N: Quote) and Wal-Mart (WMT.N: Quote).

U.S. economic data has improved in recent months. That is likely to help U.S. companies continue to report healthy profits, among the biggest tailwinds for stocks in 2012.

But there remain many reasons to be wary. Even optimistic money managers acknowledge that Europe's debt troubles are far from over and the fallout could still extend to the United States, especially the U.S. financial system.   Continued...