Individuals and institutions are therefore sitting on large pools of cash. Moreover, these pools are increasing in size as remaining stocks are bought out, and as payments into pension funds and IRA plans continue. Our experience tells us that the time to invest in the stock market is when nobody wants to be in it. The market is already discounting the negative expectations of the investment community, and since much of the community is currently out of the equities market, the risk of a dramatic decline in the wake of some unforeseen event is minimal. We think that in 1989 investor opinion of stocks will eventually improve.
Stocks are cheap.
It may not be until later in the year that this happens, but when it does, much of the cash that has been harbored in C.D.s will return to equities and we could see a substantial market rise. We therefore continue to keep our clients' accounts allocated near their maximum equity exposures.