News
INCLINE VILLAGE, Nev. — Ordinarily, we base our market forecast on earnings and interest rates. That's why we were optimistic a year ago. Last year's activity, however, was often driven by overseas political events.
Greece's financial woes became front-page news, then along came Ireland, Portugal, Spain, and Italy with their problems. The upheaval across the Middle East, Iran, the disaster in Japan, sovereign debt problems in European countries and our own struggles with deficits trumped traditional concerns about earnings and rates.
In Washington we saw our politicians at their worst when the debt ceiling needed to be raised, and again when the doomed Super Committee met.
Considering all the turmoil, one would expect a very bad year for stocks. It wasn't. It was a tale of two markets … where high-yielding stocks did very well and growth stocks did poorly. Will this trend continue?
Investors, professionals included, find it all too easy to extend current trends into the future. More often than not doing so leads to trouble as investors who see a trend going on endlessly pay more and more for less and less. Sometimes, however, trends do have legs and go on for years. That's why high-yielding stocks should continue to lead in 2012 as income-starved investors grow increasingly disenchanted with near-zero returns in Treasurys, CDs and money-market funds.
Growth stocks will improve, too, as investors warm up to stocks. There are too many positives to ignore. Corporations are lean and flush with cash. As fourth quarter earnings are released investors will be reminded once again that corporations are doing well and profits are at a record high.
There's more. There is really no alternative to stocks for growth and fewer alternatives even for income. Cash pays nothing. Real estate? Someday, yes, but it's not a practical investment for most people. Commodities? Same thing.
The many positives for the market have the upper hand for now despite the grim daily news and the well-known negatives — debt, deficits, Europe, the deep rift in Washington, housing, unemployment, etc.
The old saying goes, “Be fearful when people are greedy and greedy when they are fearful.” Many remain fearful now.
— David Vomund is an Incline Village-based fee-only Registered In vestment Adviser. In formation is found at www.ETFportfolios.net or by calling 775-832-8555. Past performance does not guarantee future results. Consult your financial ad viser before purchasing any security.
Greece's financial woes became front-page news, then along came Ireland, Portugal, Spain, and Italy with their problems. The upheaval across the Middle East, Iran, the disaster in Japan, sovereign debt problems in European countries and our own struggles with deficits trumped traditional concerns about earnings and rates.
In Washington we saw our politicians at their worst when the debt ceiling needed to be raised, and again when the doomed Super Committee met.
Considering all the turmoil, one would expect a very bad year for stocks. It wasn't. It was a tale of two markets … where high-yielding stocks did very well and growth stocks did poorly. Will this trend continue?
Investors, professionals included, find it all too easy to extend current trends into the future. More often than not doing so leads to trouble as investors who see a trend going on endlessly pay more and more for less and less. Sometimes, however, trends do have legs and go on for years. That's why high-yielding stocks should continue to lead in 2012 as income-starved investors grow increasingly disenchanted with near-zero returns in Treasurys, CDs and money-market funds.
Growth stocks will improve, too, as investors warm up to stocks. There are too many positives to ignore. Corporations are lean and flush with cash. As fourth quarter earnings are released investors will be reminded once again that corporations are doing well and profits are at a record high.
There's more. There is really no alternative to stocks for growth and fewer alternatives even for income. Cash pays nothing. Real estate? Someday, yes, but it's not a practical investment for most people. Commodities? Same thing.
The many positives for the market have the upper hand for now despite the grim daily news and the well-known negatives — debt, deficits, Europe, the deep rift in Washington, housing, unemployment, etc.
The old saying goes, “Be fearful when people are greedy and greedy when they are fearful.” Many remain fearful now.
— David Vomund is an Incline Village-based fee-only Registered In vestment Adviser. In formation is found at www.ETFportfolios.net or by calling 775-832-8555. Past performance does not guarantee future results. Consult your financial ad viser before purchasing any security.
