Stock-Market Jitters Put Investors at Ease; Recent Turbulence Is Seen as a Healthy Sign
For some money managers, the recent turbulence in the stock market isn't a reason to worry. It is a healthy sign.</br></br>Markets were rattled last week as the Nasdaq Composite Index fell 3.1% and the Dow Jones Industrial Average slipped 2.4%. The Dow, Nasdaq and S&P 500 are all down for the year after advancing earlier in 2014, following a sharp reversal in once-hot corners of the market such as initial public offerings and the shares of young biotechnology and Internet companies.</br></br>The pullback underscores concern over the broader outlook for share prices following a 30% rise in the S&P 500 last year. Valuations remain above long-term averages, while U.S. growth and corporate earnings have hit a soft patch. That is exactly kind of environment that calls for a bumpier stock market, investors say.</br></br>"You don't want a market to go just straight up to the sky," says Lew Piantedosi, manager of the $142 million Eaton Vance Large-Cap Growth Fund, which has lost 5.5% over the past month but is up 19% over the past year. "When you go straight up, there's not a lot of support on the way down."</br></br>After a run such as the nearly 30% gain in the S&P 500 in 2013, it is better for stocks to level off for a bit, he said. "We're seeing that now," he said. He expects that as investors get more comfortable with the global economic outlook, stocks will resume their rally.