As I sit and compose these thoughts shortly after the beginning of 2012, my mind takes me back to high school and Charles Dickens…”It was the best of times, it was the worst of times.” What was “best” about 2011? Certainly it was not the Red Sox pitching staff, but there were positives which were in place last year. As I name these, I try not to be an apologist for anyone or anything. Inflation continues at very low levels, (food and energy being exceptions) our economy continued a slow climb from the abyss, buying an American automobile became fashionable again, and if you were in the market for a home, both real estate prices and financing rates were at favorable levels. This, obviously, is balanced by political dysfunction, energy prices, which when dropped in the last quarter made one think that gasoline was a relative “bargain.” Hardly. To continue on, fear in Europe, a continuing and unwinnable war in Afghanistan, unemployment and record low approval ratings for both the President and Congress. These only scratch the surface, but you get the idea.
Managing money and providing sound advice during 2011 was as challenging as anytime during my career, primarily because market performance was dependent upon fear, and not fundamentals. The number of days the market had 1-2% swings appeared to be at record levels, and there was usually no rhyme nor reason for the market acting as it did. At the end of 2011, the Dow was up over 5%, the S&P was flat, and the EAFE (International) was down over 12%. Individual returns would be dependent upon overall asset mix. During 2012, we expect continued growth in the United States with. Does this mean eliminating all International assets? We do not believe that to be the case, as markets tend to turn quickly and trying to “time” the market is typically an exercise in futility. There are many wonderful companies located out of the USA, and given circumstances such as the Japanese tsunami and the Euro banking crisis can cause even the best of companies to experience a correction, whether warranted or not.
The opinions in this article are general in nature and should not be considered specific investment advice or recommendations for any individual. Indices are unmanaged and cannot be invested into directly. Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods. Past performances cannot guarantee future results.
Investment decisions should be based on an individual’s goals, time horizon and risk tolerance.