Goodbye 2011, Hello 2012
Happy New Year!!!
I have been helping clients manage their wealth for more than 21 years and I can’t remember a year that was as crazy as 2011 was. With that being said, let me start out by saying goodbye 2011 and HELLO 2012. Since 1926, the S&P 500 index has returned 11% during an election year, and out of 21 election years investors have lost money in only four of them. Lets cross our fingers history repeats itself.
As far as Wall Street is concerned, 2011 was an uneventful year where the S&P 500 Index was flat, nothing gained and nothing lost. But we know differently; the year was filled with events like Mother Nature creating havoc around the world, uprisings in the Middle East, Congress along with the President doing absolutely nothing to fend off the debt ceiling crisis in the US before S&P downgraded its stellar AAA credit rating to AA+ and the ongoing crisis in Europe where countries like Greece thought it was their right to live beyond its means and not worry about reducing spending, no way to pay for their deficit other than to take handouts from the Euro zone’s more responsible neighbors (not that entitlements isn’t out of control here in the US). The Dow hit five all time highs and lows in just one week back in August, one of the most emotional and volatile weeks of any investor’s memory. From the highs of May to the lows of October, three of the four major indexes were down between -20% & -26%, one wild roller-coaster ride and another Bear Market. Oh my, what a year it was.
Approximate returns for 2011 were: S&P 500 was flat, Nasdaq was down -2%, Russell 2000 small-cap index off -4%, Europe giving up – 11% and Emerging Markets losing more than -20%. Financials were the worst performing sector while utilities took the blue ribbon. For the most part, investors with a diversified portfolio lost money whereas the old-time Widow-Orphan strategy is what made sense, investing in dividend paying stocks and US Government Bonds. Even the world’s top bond guru, Bill Gross of PIMCO, wrongly predicted that US Treasuries would correct when they actually rallied and apologized for being so wrong, but he is still one of the best and anyone can have a bad year. Speaking of having a bad year, hopefully nobody listened to Meredith Whitney when she said to sell muni bonds because so many municipalities would default, thankfully I was buying.
I may sound like a broken record but the economy is slowly getting better, the unemployment rate is improving with the Government’s Jobs report closely watched each month and corporate America is in pretty good shape. Consumer confidence is still low but with the world’s headlines being as disconcerting as they are, who can blame consumers for being cautious. I have watched gold correct from its record breaking $1,900 an ounce in September to hovering around $1,600, and with all the world’s problems, gold bugs were yelling from the mountain top that gold should be closer to $2,500 an ounce, which makes me think things are getting better and not worse. We are not out of the woods yet and I truly believe long-term investors who don’t panic will look back at 2002, 2008 and 2011 as bad memories.
So here’s to 2012 and the next ten years being better than the last ten…..Cheers!
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