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January 2011 Market Commentary

January 2011 Market Commentary

Market Commentary: January 2011

 

1/1/11.  Often, we may think the future could not be as head-spinning as the past and present.  Something tells me when it comes to change, we haven’t seen anything yet. Globalization is just getting started. 

 

I love the “year-in-review” articles and programs that appear in late December and early January; especially those that review the last 10 years (remember Y2K?).  It is fascinating to see how much, and how rapidly, things have changed.  Technology is but one example.  A decade ago, when I started working for APA, the office had one internet connection – and 5 people took turns sharing it.  Today, a video chat with a client in Florida, colleagues in Europe, or with friends in Thailand is simply routine.  What will the new decade bring? I think it will bring an amazing new and prosperous reality. 

 

Forbes magazine published a report highlighting some things we’re likely to see by 2020.  Here’s a sampling:  2011- World’s seven-billionth child born in Cairo; flying car goes on sale for $200,000.  2013- Blue Cross/Blue Shield begins coverage for individual DNA sequencing.  2014- Bluefin tuna goes extinct.  2016- Internet voting for U.S. President begins.  2019- U.S. life expectancy declines for the first time in history (doctors blame 55% obesity rate).  2020- First private spacecraft lands on the moon.  Some of these predictions will come true and some won’t – and others not even imagined will become common in our lives (think Google, smart phones, etc.).  The current on the river of life seems to be speeding up, doesn’t it?  But first, let’s review the markets. 

 

 

Benchmark Index

3 month return

12 month return

U.S. Stocks

S&P 500

10.5%

12.8%

 

Wilshire 5000

11.5%

15.2%

 

NASDAQ

13%

16.9%

International Stocks

MSCI EAFE

5.5%

          9.4%

Fixed Income

Short Term Bonds

-1.5%

1.2%

 

TIPS (Treasury Inflation Protected Securities)

-1.5%

3.5%

 

Intermediate Term Bonds

-4.5%

4.3%

 

Aggregate Bond Market

-3%

2.1%

What happened to a fragile year?  The first six months of the year saw a decline in the U.S. markets by about 8%.  The last six months saw a rise between 20-25%.  [Predictably, optimists have now come out of the woodwork.]  All the major stock indices finished up substantially for the fourth quarter of 2010 while the fixed income securities fell as investors felt safer moving into stocks.  Though the stock markets around the globe showed tremendous strength, this global recovery is highly leveraged with government debt and we continue to be cautious and careful in our recommendations to you. [The U.S. public debt per capita in 2000 was $18,050 compared to $38,875 today.]  We expect to see very uneven markets in the global economy as countries attempt to manage debt burdens, keep inflation under control, and foster growth.

As advisors to you on investments and financial matters, we are honored to have a role in your success.  We provide you a second opinion and help you make decisions every day in many financial areas of your life.  With this honor comes the responsibility to look ahead and make plans to grasp every opportunity.  In the next decade, as globalization accelerates, both opportunity and risk will come more rapidly than in any period of our existence.  With advancements will come a darker side - and the critical emphasis on decision-making. 

 

We have written many times on the rapid flow of information (globalization) and how it has not translated into improved decision-making.  Recently, Harv hosted a seminar that included the topic of the growing wealth gap.  The bad news is that this disparity will only get worse.  Crises, and decision points, are likely to happen much more quickly.  Unfortunately, many people will make poor decisions in the rapidity of change.  Of course decision-making has always been critical, but in the decade to come it will be even more so.  This is where we expect to help.  We will help strip away the unnecessary information and the many fears that consume the anxiety hungry media to help you make intelligent, educated choices.  We also encourage you to do more multi-generational thinking.  The structures, strategies, and purposeful approaches we consistently employ with you also need to be shared with your children and loved ones. 

 

As we set our sights on things ahead, please let us know how we can help expand the reach of your reward.  We look forward to experiencing the next decade, with all of its opportunities and decision points, successfully in partnership with you.  

 

We should so live and labor in our times that what came to us as seed may go to the next generation as blossom, and what came to us as blossom may go to them as fruit.  Henry Ward Beecher

 

May you have a prosperous and blessed year,

Carl Amos Johnson, MBA, CFP®, AIF®

January 4, 2011

 

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