Attain your investment goals
Courtesy American National Bank, Colorado Springs LIVING WELL Magazine
How ironic, one of the most volatile years for the equity markets in over a generation resulted in the smallest change in value! On Dec. 31, 2010, the S&P 500 closed at a value of 1,257.64. The same market closed on Dec. 30, 2011 at a value of 1,257.60. Equity investors basically earned the dividend yield that as of Dec. 31 was 2.12%. A bit of consolation is that treasuries are yielding lower. Five-year treasuries are yielding 0.83% and 10-year treasuries are yielding 1.88%.
So what will be impacting the markets in 2012? I see four main themes to watch. Number one will continue to be the uncertainty surrounding the European economy. It appears that the Euro, which looked all but dead a couple of weeks ago, will survive, but the volatility associated with the implementations of the numerous austerity programs will remain and cause both positive and negative swings in the equity markets.
Number two will be geopolitical events in the Middle East. If Iran follows through on its threat to block the 30-mile-wide Strait of Hormuz, we could see a spike in oil well into the triple digits. If they back down oil prices could go back down to reasonable levels. I would expect to see WTI range between the $80 and $120 per barrel.
Number three, will be the growth in the developing economies of China, India and Brazil and the growth of the U.S. economy. After significant declines in 2011, emerging markets should show positive signs in 2012. The U.S. economy will continue to muddle along growing between 2-3%. Unfortunately, this growth will not allow the unemployment rate to drop below 8%.
Finally, the biggest impact will be the presidential election. Regardless of the outcome, the elimination of the uncertainty associated with who will be the occupant in the White House, we should see a significant rally during the second half of the year. The rally could begin well before the election as, we have not had a presidential upset in several generations.
The bottom line is that the fundamentals of investment have not changed. In order to attain your investment goals you only have to do two things: (1) have a diversified portfolio. If you are investing only in equities, have a mix of Large Cap, Mid Cap, Small Cap, International and Emerging Markets. The balanced investor should have at least a third of your portfolio in short-term fixed income vehicles to provide stability when we encounter the expected volatility in the equity markets. (2) and most importantly, have a disciplined method of rebalancing (and, if possible, adding to your portfolio via vehicles like a 401(k) or IRA). This will mean that you will need to take some money off the table, should one particular area of your portfolio do relatively well, and move the proceeds to an area that has been a laggard.
Provided courtesy of Dan Korleski, chief investment officer; ANB Bank, Wealth Management Group. The information and opinions in this article were obtained or derived from sources considered reliable. Opinions represent ANB Bank Wealth Management’s opinion as of the date of this article and are for general information purposes only. Past performance does not indicate future results.
Learn more about ANB Bank at www.ANBbank.com.
*Trust and investment services are not insured by the FDIC, not a deposit or other obligation of the institution and are not guaranteed by the institution; and are subject to investment risks, including possible loss of the principal invested.
