The last few years have certainly been hard for everyone. Getting growth from your investments has been equally as difficult. From January 1, 2008 to this January 1st, the S&P is still down 10%. The DOW, while a little better, is still in negative territory, even after a 5.53% increase in 2011. Interest rates are at all-time lows, making Bond returns very limited as well.
I find myself trying to decide the best pathway for my clients and myself, and I keep wondering where to focus. Clearly the focus of the media is short term and designed to get the most attention, so they focus on bad-bad-bad all the time. And there is certainly enough negativity to go around: Unemployment by most estimations will not return to a near-normal 5% for some time, perhaps 2015. The consumer is very nervous (although they continue to spend, and the Consumer Confidence was better than expected last week), housing is still very much unsettled (Home prices fell in October for the 6th straight month), and the European Debt Crisis is anything but resolved. Short-term lending is almost frozen.
Here at home, we are in the middle of a deadlocked Congress and President, both apparently intent on not cooperating or leading or doing anything that they were elected to do – until after the election. It is sizing up to be a very ugly election campaign, with unprecedented negativity in the IOWA campaign already – and those are just the Republicans!
There is a view that the chronic negativity and the actual unresolved issues will grind the economy back down in 2012. Certainly, a blow-up in Europe causing a recession there would have negative impact on us as well. At the same time, business balance sheets both here and abroad are at record highs. Business has shifted to self-reliance instead of borrowing (good for them, not so good for financial stocks). 3rd quarter earnings showed more than 2/3 of the reporting companies surprising with their high earnings.
I personally believe 2012 will be another turbulent year, with the current highly volatile markets continuing for some time. And only time will tell if this is a good year for the market, but it is not likely to be a good year in the bond markets in any event, with interest rates remaining low. A cautiously optimistic asset allocation may be the best approach for the next 12 months.
Notes and Disclosures: Indices mentioned are unmanaged and cannot be invested in directly. Opinions expressed herein are based on information from sources believed to be reliable, however, these opinions may change as information becomes outdated or irrelevant. Past Performance e does not guarantee future results. Reeve Conover is a Registered Representative, securities are offered through Cambridge Investment Research, inc, a Broker Dealer, Member FINRA/SIPC. Cambridge and Conover Consulting are not affiliated.