It's great to buy stocks in a recession.
Unless, of course, there aren't any stocks worth buying.
The Orange County Register's panel of investment experts is apparently getting a touch skittish when it comes to holding stocks these days.
Sure, the seven analysts increased their recommended exposure to stocks in the fourth quarter to 61 percent of a portfolio, up from 56 percent for the third quarter.
All of the money needed for those stock purchases came out of the panel's average allocation for cash, the meager returns from which served as a motivator to keep buying equities. Recommended cash holdings dropped to 11 percent for the fourth quarter.
But even if the asset-mix changes were bullish, panel members' comments were far less enthusiastic.
"Much tougher times ahead for stocks and the economy," Richard Fontaine, a Baltimore money manager, warned.
A rally in stocks this year has already produced gains of 16.8 percent in the Standard & Poor's 500 index. That jump leaves few issues cheaply priced, analysts say. Add to that a growing belief that corporate earnings reports will be depressing this fall.
With that scenario, two panel members wouldn't be surprised to see yet another sharp fall correction like those of October 1987 and October 1989. David Holt of Wedbush Morgan in Los Angeles sees a possible pullback in stock prices of 5 percent to 8 percent from current levels. Richard Howard of T. Rowe Price in Baltimore says he wouldn't be surprised if the turndown reaches 10 percent to 25 percent in scope.
Even Dan Sullivan, a newsletter editor from Seal Beach, Calif., has cut back on his bullishness. Previously advising full investment in stocks, Mr. Sullivan has now pared back his recommended stock holdings to 78 percent of a portfolio.
He said, "However, we have every reason to believe that this bull market will prevail, at least for the next three months and possibly longer."