Market volatility creating buying opportunity

It's been a bumpy ride for investors for the past month. Click the chart for more on stocks.

The recent ups and downs in the stock market may be frustrating, but one strategist said the break in the rally is also creating an attractive entry point for investors who remained on the sidelines during the first few months of the year.

"The market has been up, but a majority of investors have not participated," said Nathan Rowader, director of investments and senior market strategist at Forward Management, an investment firm in San Francisco. "Many were surprised by the strength of the market in the first part of the year, and the pullback gives them a buying opportunity – a chance to enter the market."

The latest moves downward were sparked by chatter among Federal Reserve governors as well as Fed chairman Ben Bernanke that the central bank may begin to slow its stimulus program, which currently involves purchasing $85 billion a month in mortgage-backed securities and Treasuries.

Related: The bull market Wall Street loves to hate

The Fed's bond buying program, known as quantitative easing, has been widely regarded as the major factor driving stocks higher.

But Rowader, interviewed at the Morningstar Investment Conference in Chicago this week, said he thinks investors took the Fed's comments about tapering QE "out of context," and their guidance isn't a departure from what has been known all along: the Fed will wait until the economy is on its own two feet before it begins to unwind its stimulative monetary policy.

"I think the Fed is just going to keep reinforcing its earlier messages," he added. "If the economy keeps improving, they'll consider changes, but not quite yet."

While the recent retreat in the market has only been modest, Rowader doesn't expect stocks will fall too much further. The economy may not be as strong as it needs to be for the Fed to begin its exit strategy, but it is slowly and gradually improving and rapid inflation is far from on the horizon—two dynamics that are enough to keep boosting the market.

As investors make their way into the stock market, Rowader also suggests they move out of their bond holdings.

"Investors have unrealistic expectations for bond investments," he said, noting that the rush into bond funds over the past several years has been because investors are hanging on to the fact that bonds have delivered a strong performance over the past three decades amid falling interest rates.

"But we're now in an environment that favors stocks over bonds," said Rowader, adding that stocks are cheap relative to the bond market and also on a historical basis.

Related: The real reason interest rates are rising

For investors seeking steady and safe income, he recommends stocks that pay dividends, but warns against utility stocks.

While utilities are known for paying healthy dividends, their businesses are highly sensitive to interest rates, and rising rates can hinder their ability to pay out dividends.

Posted in: Bernanke, bond buying, bonds, buying opportunity, dividend, economy, federal reserve, inflation, interest rates, quantitative easing, stimulus, stocks, volatility

• Wall Street sours on gold

  Wall Street is turning its back on gold.

  Both Goldman Sachs and Deutsche Bank lowered their year-end forecast for the precious metal this week, citing an improving U.S. economy.

  Goldman slashed its target to $1,545 per ounce for 2013, down from its previously estimate of $1,610. The bank also lowered its outlook for 2014 to $1,350 an ounce, down from an earlier forecast of $1,490.

  Meanwhile, Deutsche Bank reduced its year-end forecast MORE

  Hibah Yousuf - Apr 10, 2013 2:06 PM ET
  Posted in: cyprus, Deutsche Bank, economy, Europe, forecast, gold, Goldman Sachs, inflation, outlook, prices, Wall Street

• Bond bubble may be closer to popping

  The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

  The Dow is at a record high and the S&P 500 is thisclose to joining its blue chip brother. But as investors become more and more giddy about stocks, bonds have suffered collateral damage.

  The yield MORE

  Paul R. La Monica - Mar 12, 2013 12:31 PM ET
  Posted in: bonds, dollar, federal reserve, inflation, stocks

• Actually, the real Dow is still 11% below its record

  The Dow Jones industrial average rose to a new all-time high Tuesday ... sort of.

  The record that everyone is talking about is in nominal terms and doesn't take into account the impact of inflation, which has increased more than 10% during the past five years, according to the government's Consumer Price Index (CPI).

  If you factor that in, the blue chip index is actually still about 11% below its all-time inflation adjusted high, MORE

  Hibah Yousuf - Mar 6, 2013 10:25 AM ET
  Posted in: dow, Dow Jones industrial average, inflation, nominal, record, stocks, total return

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  The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

  Last I checked, there has not been a palace coup d'état in the halls of the Federal Reserve. Kansas City Fed president Esther George has not wrested control of the central bank's chairmanship from Ben MORE

  Paul R. La Monica - Feb 21, 2013 11:20 AM ET
  Posted in: bonds, economy, federal reserve, inflation, jobs, quantitative easing, stocks, unemployment

• Gold drops to 7-month low, flirts with 'death cross'

  Gold prices dropped to a 7-month low Wednesday, and are on the verge of hitting a technical level that could signal more bearishness ahead.

  Gold, which has tumbled more than $200, or 12%, since early October is close to forming a so-called death cross, the term for when the 50-day moving average breaks below the 200-day moving average.

  The last time gold prices entered into death cross territory was in April MORE

  Hibah Yousuf - Feb 20, 2013 2:27 PM ET
  Posted in: 200-day moving average, 5-day moving average, bearish, death cross, dollar, economy, gld, gold, gold prices, inflation, metals, risk, safe haven, technical

• Gold bugs dancing on the debt ceiling

  The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

  There is a common misconception that gold is only a great thing to own when investors are in full-blown Chicken Little panic mode. But gold has enjoyed a decent rally in the past few weeks MORE

  Paul R. La Monica - Jan 24, 2013 11:56 AM ET
  Posted in: commodities, debt ceiling, federal reserve, gold, inflation, QE

• Economy IS improving. Don't mess it up, Congress!

  The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

  The U.S. economy has been slogging along at a sluggish pace for several years. I've been referring to the post-Great Recession period as the barbecue recovery since 2010. It's been low and slow.

  But even conspiracy theorists MORE

  Paul R. La Monica - Oct 17, 2012 12:41 PM ET
  Posted in: economy, fiscal cliff, housing, inflation, retail sales

• Gold is not just a lunatic fringe investment

  The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.

  Gold is often derisively referred to as an investment that only kooks who are preparing for the end of the world in a bunker can love. But it might be time to stop with all the MORE

  Paul R. La Monica - Sep 25, 2012 12:53 PM ET
  Posted in: ECB, federal reserve, gold, inflation, QE3

• Bill Gross: 'Central banks are where bad bonds go to die'

  The Bond King came out swinging against the most recent easing plans out of the Federal Reserve and European Central Banks on Twitter late Monday.

  Gross: Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple.— (@PIMCO) September 17, 2012

  The comments from Bill Gross, founder of investing firm Pimco, come just days after the Fed unveiled its plan MORE

  Hibah Yousuf - Sep 18, 2012 1:53 PM ET
  Posted in: bill gross, bonds, Fed, federal reserve, inflation, mbs, mortgage backed securities, pimco, QE3, total return fund, treasuries, treasury