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Dow at 15,000: What the stock market is telling us

As Wall Street posts a new record, experts decode its message about the state of the economy – and whether it's too late to invest.

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Baby boomers, however, do not. They're the investors who lost the most during the financial crisis and have the least amount of time to recoup their losses. Hit by the dot-com crash of the early 2000s as well as the financial crisis, they're unusually cautious. Yet the absence of a healthy return on traditional conservative assets, like bonds, is forcing them into riskier holdings.

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"Our clients, baby boomers in particular, they're afraid of the market," says Scott Wren, senior equity strategist with Wells Fargo Advisors in St. Louis. "But they're afraid that they'll outlive their money in retirement, too."

What boomers decide to do will help determine the future course of the market. A new influx of money into stocks would tend to bid up prices. How much money people are holding onto is uncertain. "It's lots – trillions," says Mr. Wren. "But I question whether much of that money will ever come back into the market."

There are other potential sources of new cash for the market. Bondholders are expected to rotate out of bonds once the Fed allows interest rates to begin rising. So far, however, those anticipating a great cycle out of the financial instruments have been disappointed.

Foreign investors are also putting money into the US market. After falling by more than a quarter between 2007 and 2009, the value of US equities held by foreigners has rebounded and reached a new record of $4.2 trillion as of June 2012, according to the Treasury Department. With fresh concerns from Cyprus about government appropriation of large bank accounts in the eurozone, more money from Europe is thought to be flowing into the United States, says Polcari.

This isn't the first time the stock market has staged a big recovery and individual investors have been late to the upturn. After four years, this bull market looks enervated. But many analysts say stocks still have room to rise.

"We're in what we consider to be the fourth quarter of this bull market," says Patrick Hejlik, chief executive officer of Fourth Quadrant Asset Management, a wealth-management firm in Danville, Calif. "We think there's still some significant upside to the equity markets. Fourth-quarter bull markets can be tremendous periods."

Other analysts are even more optimistic. "I believe we're at the beginning stages of a bull market," says Christopher Zelesnick, senior managing director of Ziegler Wealth Management in Chicago. In his view, much of the market's run-up since 2009 was a snap back to normalcy and the bull market is really only 15 to 18 months old. With the Dow Jones Industrial Average having flirted with the new highs near 15000, "I think it will hit 20000 before it sees 10000."

But everyone recognizes that the market does not go up in a straight line and that pullbacks are inevitable. "One thing we know from history, it's going to be a wild ride," says Angel, the finance professor. "To paraphrase Harry Truman, if you can't stand the volatility, stay out of the market."

– Monitor Correspondent Margaret Price contributed to this story from New York.

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