Well, Here We Are...
Well here we are, mid-summer 2012. Hot as we anticipated in January. Looking for needed rain on our yards and gardens. Wondering where the stock market will end up by the end of this year. Before we highlight both the headwinds and opportunities that lay before us, let’s quickly summarize what has happen thus far. The view of the market from about thirty thousand feet shows that the market has behaved decent the first half of the year. The bond market has been steady with principal values in government securities funds yielding in the average range annually of 2%-3% and in the corporate bond funds averaging annually in the range of 4%-5%. As of yet, inflation has not been an influencing factor. In fact, something we are all affected by, gasoline prices, have come down. For a large portion of the investments we manage, the continuing and real fear of principal loss due to a sudden market event keeps a majority of the investment in this bond arena. The protection of principal and positioning in best obtain as much yield as possible is our objective.
The equity side of the investment puzzle still continues to lag and be narrow in performance scope. However, overall, the Dow Jones Industrial Average and the S&P 500 are up since the beginning of the year. Today’s higher stock market value has not come without market swings and adjustments, but like we said about 2 years ago, the time of straight-line performance is no more and volatility is here to stay.
So now we look forward to December and see what is before us and how are we going to invest.
In the bond world we will continue to be vigilant for inflation and will adjust our portfolio recommendations if necessary. We do not think this will happen in the next six months, but we will still be watching. Investing in high quality corporate bonds, government securities, and some high yield funds will be our focus. Principal stability with seeking yield will be the goal.
On the equity side we will continue to be overweighed in the area of high quality stocks, Exchange Traded Funds (ETFs), and managed funds that pay solid dividends. Funds, ETFs, and stocks that are large cap, name and product recognized, with that solid dividend history is where we will be. We will sprinkle in the portfolios, some growth aspects and we are adding real-estate funds back into the holdings. Our goal would be to continue to move another 5% - 10% into these sectors, but we will do that only if the data supports it.
The key headwinds that we will need to be aware of include the upcoming elections here in the U.S., the pending tax changes here in the U.S., the slowing U.S. economy, and the changes in Europe. Add to this mix in this yucky pot any unforeseen geopolitical event, and well, that just means we will not let our guard down.
I still see the glass half-full and we have seen progress year-to-date in portfolios. We look forward to this coming fall season, coolness in the air, changing colors of the leaves, and hopefully a higher market.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Stock investing may involve risk including loss of principal.
There is no assurance that the techniques and strategies discussed would be suitable for all investors or will yield positive outcomes. This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. There is not guarantee a 4% rate of return will be attained.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
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