It was an amazing start to 2012. The first quarter was almost too good to be true. There was an endless amount of up days, with a few scattered days of down. The S&P 500 ended the first quarter with a 12% return. This was the best first quarter since 1998.
A surprising return based on all of the negativity the media provided us in the fourth quarter of 2011? Not really if we look at some of the key drivers of the first quarter returns. The first quarter provided us with record corporate earnings, a decline in unemployment, an easing of the fears that Europe was going to go bankrupt and the U.S. Federal Reserve commenting that they plan on keeping interest rates low into 2014. The important takeaway is that we have gone from a majority of negative news to a majority of positive.
Can the rally last is the question? Although unlikely to keep pace with the first quarter’s 12% return, most of the catalysts remain to keep the market feeling positive. The recent spike in oil prices and resurfacing of debt issues in Spain have muted the exuberance felt throughout the first quarter, but not enough to provide the market with any significant pullback. What this shows is that the investing community has begun to switch its attitude from risk avoidance to buy on the dips. This attitude has seemed to put an invisible floor on any downward momentum as many money managers and retail investors who have not had a chance to participate in the upturn due to its swift rise are using any market downturn as a chance to allocate money into stocks. Even though I would not be surprised if we saw a pullback, if the factors above remain as they are, any pullback should be short lived and the trend mid to longer term should remain positive.
As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering any market
uncertainties.
Jason M. Vavra, CPA, PFS
Disclaimer
The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual
investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.
