Vigilare Wealth Management Q4 Recap
Wow! 2011 is now in the books and a wild ride it was. For the year, the Dow Jones Industrial Average closed plus or minus 200 points on 37 different occasions. In fact, the average daily high\low range for the Dow since August 1st was a whopping 270 points! This stock market volatility was tepid compared to the international markets. Europe flirted with disaster throughout the year as a “Lehman Brothers” scenario seemed to be lurking in the shadows, only to temporarily vanish with the conclusion of each of the countless European summits. Meanwhile, Asian markets quietly posted abysmal performance results with many countries struggling to balance inflation and growth.
The year saw its share of natural disasters and geo political events. Japan suffered a devastating earthquake and a subsequent nuclear power plant disaster, there was severe flooding in Southeast Asia, and East Africa suffered(ing) a massive drought creating famines not seen in at least 30 years. Also, there were a number of regime changes in the world, spawned by infectious uprisings as in North Africa/Middle East, or due to natural causes as in North Korea. The U.S. ended the war in Iraq, but war in Afghanistan continues. Iran’s quest for Uranium enrichment makes a U.S./Israeli confrontation with Iran almost inevitable.
Naturally, all of the major global stock markets were down for the year, except for the Dow Jones Average which posted a respectable single digit positive return for the year. Within the U.S. stock market, Utilities, Consumer Staples, and Health Care stocks were the best performers while Financial stocks were the worst performers. Was this the consensus a year ago? Absolutely not! Many pundits were arguing for heavier allocations into the “sexy” emerging markets due to the higher growth and lower debt levels in those countries. There were a myriad of reasons why we felt this was an oversimplification of the prevailing global economic picture. As you know we decided to take a more conservative approach in 2011.
Some of the themes that may have an impact on the financial markets in 2012 are:
-European debt crisis still unresolved
-U.S. elections (wasn’t the third year of a presidential cycle supposed to be a lock for a great year for stocks?)
-Implications of austerity (fiscal policies) on growth in the developed markets
-Earnings resiliency (especially U.S. companies) sustaining through 2012?
-China hard landing or soft landing?
-Central Banks and Monetary Policy
Stay tuned for elaboration on these topics among others throughout the year. We do not need to see clear blue skies to confirm a favorable investment environment. There are some potential positive catalysts which could make 2012 a surprisingly good year. We do however need more than anecdotal evidence to invest with conviction.
Happy New Year!
The Vigilare Management Team