Watching the Dow: ‘A little fear is healthy right now’

The Dow Jones industrial average surged past its record high and kept going on Tuesday. It jumped from the opening bell, climbed as much as 158 points early and reached 14,286, breaking through its previous record high set in October 2007.

Thank your friends at the Federal Reserve, CBS Moneywatch’s Jill Schlesinger told Seattle’s Morning News.

With low interest rates, large investors with very little choice among all the different assets to buy, are finding that stocks are probably their best bet.

“The trader in me says not to fight the trend,” said Schlesinger. “But the other part of me says, if you haven’t looked at your 401K or IRA in a long time – now might be an awesome time to re-balance.”

The warning signs she said, lay with the Fed. They’re going to keep interest rates low, but only until the employment picture is better. What they have defined as “better” is still a ways off.

“That’s going to help stocks,” she said of the short term.

Once the employment rate reaches the desired amount, and the Fed reverses course and raises interest rates, that’s when she believes stocks will start to trend down again. “I think a little dose of fear wouldn’t hurt you right now,” she cautioned.

Overall, Schlesinger said there are a number of reasons to be optimistic. Our economy is looking healthier, and Schlesinger pointed out we’re not losing jobs every month.

But employment will continue to be an issue, she said. While 12 million people are out of work now, “Hundreds of thousands more will lose their job because of [sequestration] cuts.”

Ultimately, Schlesinger said if you want to stay ahead of the game, balance remains the key. “The people who said ‘a little stock, a little bond, a little cash’ have done better over the last decade.”

The Associated Press contributed to this report.