Happy New Year
Happy New Year!!!
“Baby its cold outside” but the stock market is the hot place to be!!! Let’s hope that 2010 is nearly as good as 2009 which turned out to be a phenomenal year compared to how it started. Last year at this time we thought the world was coming to an end and we were all tired of hearing the comparison(s) to the Great Depression years, but this year, we have a much better outlook, what a difference a year makes.
Professionally, I often counsel investors to do things that don’t feel good. My job is to take the emotion out of the decision making process and to think rationally with information, which doesn’t mean we will always be right, but we won’t allow emotions to get in the way of logic. It is too easy to be persuaded by noise (negative headlines etc.) and 2009 was a year when the biggest returns were made by doing the opposite of what many investors and advisors thought was best. If the same holds true in 2010, equities could perform much better than bonds, but we’ll have to wait and see.
The financial markets closed 2009 with the largest annual gains since 2003. The economic recovery from a devastating 2008 downturn, combined with an improved outlook on profits helped to drive the rebound. The Standard & Poor’s 500 Index was up 23.5 percent for 2009. The Dow Jones Industrial Average gained 18.8 percent for the year. NASDAQ was up 43.9 percent.
The majority of the growth in 2009 occurred during a nine-month rally. Technology and materials shares advanced due to expected economic recovery, increased capital spending, and demand for energy, metals and other natural resources. Many of the stocks that got hit the hardest in 2008 came roaring back in 2009.
Many investors ask me why we don’t do more market timing and I share with them that you have to be lucky twice…once selling out at the top and then again buying back in at the bottom. Long term, there aren’t any market timing strategies that work and we would rather manage our client’s portfolio by acting prudently with investments’ that suit their needs and meets their tolerance for risk. Think about this….The 50 stocks in the S&P 500 that did the worst in 2008 were up an average of 101 percent in 2009! The 50 stocks that did the best in 2008 were up an average of just 9 percent in 2009.
I am in the camp that feels the stock markets will continue to rally and we are starting out 2010 on a positive note…for the first full trading week the indexes have gains of almost 3% for the S&P 500 and the DJIA closed at 10,618 which is its highest level in more than 15 months, up 2% for the new decade. Unemployment topped out at a revised level of 10.1% in October before retracting to 10% in November and held steady at 10% in December’s report which was recently released.