Welcome to the January 2013 newsletter. 2013 is certainly off to a great start as far as the stock market is concerned.
Let’s take a look back at the unexpected performance for the month: the S&P 500 was up just over 5% which was surprising considering that at the end of Dec we were faced with the deadline of the Fiscal Cliff and it appeared that our only two options were for the market to go down a little or go down a lot. Once the political issues were no longer the main focal point, the markets sought direction from the economic health of publicly traded companies and responded nicely from positive earnings growth reports. Even as Apple disappointed, the market shrugged it off and forged ahead. The so-called January Effect says that as January goes, so goes the year; let’s hope that’s the case this year.
As frightening as the situation looked at year end, things changed very quickly in the market and we were able to get back in to capture much of the gain. If you’ll look at the market for the last two months of 2012 and now the first month of 2013, you’ll see that the overall gain was actually less than the market performance just in Jan. This shows how beneficial our process is in that we were out of the equity markets right after the election and didn’t get back in until the first of Jan, thereby enjoying most of the gain even though we avoided the considerable risk by being out almost two of the three months.
Once again, I think an important lesson to be learned here is how the media works things up into a frenzy and yet the outcome is melodramatic. Not to say that we don’t still have significant challenges to overcome (I can think of 16 trillion of them, in fact), but for now the markets seem to be ready to continue this run. The media can go back to finding something else to dramatize; like the actual headline I saw last week: “Is your toilet ready for the Superbowl?”
So, as we’ve been since the second day of trading in January, we’ll remain 100% invested on the equity side and watch carefully for any signs that this rally is losing steam. That’s it for this month. Thanks for listening. Let us know if you have any questions and feel free to forward this to anyone who you think it might help. Talk to you next month.