Equity Markets’ Good Performance in 2012 Sets the Stage for 2013

Not so fast. It’s important to take a close look at what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. The following are some thoughts about U.S. markets. For a full, highly detailed examination of U.S. and international markets, see “2012: Resumption of the Stock Market Recovery,” at PPCA Commentaries.
 
1.     Investors bailed from equity mutual funds but corporate-share buybacks more than offset this exodus. Also, much of the stock mutual fund redemptions found their way into stock ETFs, a move from active to passive management.
 
2.     Infrastructure stocks – energy and materials – have lagged the total market and have exhibited higher risk. These sectors have disappointed on a relative basis, despite expectations that government spending would favor them. I think these stocks are still a good play, especially if China and India resume their growth.
 
3.     Health care has dominated the market on a risk-adjusted basis, providing a 20% return with below-market risk. Medical companies have been among the largest share repurchasers. Obamacare will matter in 2013 and beyond, benefitting some segments of the health care market, like pharmaceuticals, and undermining others, like health insurers.
 
4.     Financials recovered in 2012, returning more than 25%, albeit with relatively high risk. This performance is a reversal of the previous four years, during which financials lost 42% while the total market lost 5%. As described in my 2011 commentary, the style classifications of fallen financials distorted some benchmarks through 2011, but they are now correct again. Financials will struggle in 2013 because we are likely to see increases in interest rates.
 
5.     Consumer discretionary stocks were the next best performing, after financials, with risk near the market. Investors perceived that consumers had sacrificed long enough, saving more and spending less, at least those with jobs. Christmas spending did not confirm this perception, with spending roughly the same as 2011. I would not expect consumer discretionary stocks to continue to lead in 2013.
 
6.     Technology stocks did not deliver returns commensurate with their risk. In particular, large-value technology stocks (no oxymoron) were a drag on performance in the year, and I think these stocks will come back in 2013. 
 
7.     Consumer staples underperformed the market with less risk. Look for these companies to defend well if we see another recession. We have to eat.
 
8.     Value outperformed growth, although growth was riskier. Given the uncertainties facing the U.S. economy with the debt crisis and the possibility of another recession, value gets my vote over core and growth in 2013, as a flight to safety.
 
The commentary also takes a longer view, looking back over the past 87 years:
 
 

This Website Is For Financial Professionals Only


A Strategically Focused CE Curriculum

With classes approved for over a decade by the CFP Board, IWI, and NASBA, Advisors4Advisors CE classes are an optimal knowledge stream for CFP®, CIMA®, CPA, CPA/PFS®, CFA®, and other practitioners. It's not a grab bag of speakers willing to sponsor CE content. Nor is it a one-man CE course. It's a group of subject matter experts with amazing communication skills and a history of thought leadership that, together, give advisors a well-rounded knowledge system for running a professional practice ethically and intelligently.

CE Since October 2008

A4A CE classes for financial professionals began in October 2008, the week Lehman Bros. collapsed. Initially billed as “The Financial Crisis Webinar Series,” A4A connects advisors with authoritative sources on investing, tax, and financial planning, chosen by A4A Editor Andrew Gluck, a veteran financial reporter. A4A members get a stream of CE classes for an advisor who: 

  • holds a CFP®, CIMA®, CPA, CPA/PFS, CFA or other designation requiring CE annually 
  • values monthly CE classes by Fritz Meyer, Craig Israelsen, Bob Keebler, Frank Murtha, or Andrew Gluck
  • diversifies a core of client portfolios in low-expense funds
  • invests based on MPT and economic fundamentals
  • advises on tax and financial planning as well as investing
  • needs financial counseling skills
  • wants the Certified Financial Counselor™ designation 
  • is building a brand as a thought leader locally or in a niche
  • wants the facts when bad news breaks
  • wants CE aligned with a content marketing system
  • wants 24/7 access to CE on-demand
  • insists on objective evidenced-based tax and investment planning analysis
MEMBER REVIEWS 
William Desormeau, Jr.  
It is not possible for me to overstate the cumulative value that Craig, Bob and Fritz have added for over 10 years to my investment advisory practice, as well as for personal and family financial planning. A4A gets my highest recommendation
Lynn Najman, CFP®
I’ve subscribed to A4A since its inception, and always find it intellectually stimulating and on point. It’s one of the few CE solutions out there that doesn’t waste my time by pushing product or talking down to me.

PeteDeacon-CPA-CFP

Pete Deacon, CPA, CFP®
A4A has had a profound effect on my business. Since 2009, I’ve relied on the consistent messaging and updates to run my business successfully. Being able to present the information from Bob, Fritz, and Craig's ongoing CE webinars has been a significant benefit.

fredericMayersen-phd-cfp

Fredric Mayerson, MBA, PhD, CFP®
I've been a financial professional and professor of finance for 35 years and find Fritz Meyer and Robert Keebler to be among the most engaging, incredibly knowledgeable, and experienced presenters I’ve encountered. They deliver an extraordinary amount of information in an extremely interesting way — sequentially and developmentally, utilizing pedagogical tools and techniques that few possess.  A4A to is the most consistently excellent CE program available.  
Ron Roge, MS, CFP®
I’ve been attending A4A many years because the CE classes are outstanding, and my time is valuable. Though I have over 35 years of experience, I’m always learning something new on A4A. I attend fewer conferences now because the CE is generally not advanced. If you want to learn from the best, in a faster, easier, and less expensive way, I highly recommend A4A.

John R. Day, CPA/PFS®

I’ve been a member since 2011 and never miss the monthly webinars with Fritz Meyer. I appreciate Fritz’s independent views on the economy and markets and Bob Keebler keeps me updated on excellent tax planning ideas. A4A is a great value!

NormanPolitzinerCFP

Norman Politziner, CFP

I wouldn't miss a Fritz Meyer webinar unless my pants were on fire. I've relied on Andrew Gluck's knowledge systems --client communications and CE -- for two decades. It's simply the best solution for tax, financial, investment, and risk-management professionals.®   

Dan Hawley, CFP® 

A4A, for over a decade, has been a great resource for useful and accurate information and CE. A4A and Advisor Products are bargains for an advisory practice. 

KevinBrosious-CFP-CPA-PFS

Kevin Brosious, MBA, CFP®, CPA/PFS®

I get CPA CE credit and CFP credit for the webinars.  But not only that, the A4A content is terrific