Nice Start to the New Year
February 14, 2012 Leave a comment
The Dow is up 5%, the S&P 7%, and the Nasdaq 100 12% in the New Year, continuing the trend from December. The impetus seems to have come from an improving economy and better jobs reports in the U.S., plus the realization that Greece doesn’t spell the end of the world, whatever the outcome there.
It’s emotionally comfortable to project this trend onto the remainder of the year, but we’ve come pretty far pretty fast since the end of November. Although I feel the U.S. economy can contiue to improve this year, it looks like Europe’s economy is going to struggle some (probably in current market prices,) and there are some troubling signs in China (maybe not in current prices.)
As well, some of the most popular stocks have charts that are starting to look parabolic as others are running up against overhead resistance. There were quite a few poor end of year earnings reports and disappointing outlooks from several CEOs.
Having said all this, large cap, multi-national companies with solid and growing dividends and solid end of year reports are still attractive on pullbacks. Valuations don’t seem to be stretched in several industries like telecom, “old” tech, and healthcare, among others.
Emerging markets have rallied nicely in the past few months, after a bad 2011. It looks like time to trim a little there if you’ve got a full allocation (more than 10% of investable assets.) If you’re underinvested in emerging markets (less than 5%) a substantial (10% or more) pullback would probably be an opportunity since they are still well off their early 2011 highs. A pullback in gold could also be an opportunity as long as it stays above $1500 per ounce.
This is a very good time to go into our 401k accounts and trim laggards and research new funds that may have been added to your plan. Be willing to add to your best funds on market pullbacks. (This process is how you insulate your 401k from multi-year underperformance.)
As always, call or email with questions. Bob