SD&H 2011 Annual Market Review - Sloy, Dahl & Holst, Inc.

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) January 18, 2012 --

At the closing bell on the last trading day of 2011, the S&P 500 ended the year at 1,257.60. That left it just fractionally below where it started in January, at 1,257.62. If all you saw were those two numbers, you would think it had been a pretty uneventful year. However, as we all know, 2011 was anything but uneventful. It was a year of major swings in both directions, many times over. In the third quarter alone, the S&P 500 was negative roughly 14%. Financial markets were driven by global headlines, as opposed to fundamentals, especially here in the U.S. This left most analysts and advisors extremely frustrated. It also left most investors just as nervous and uneasy as they were at the end of 2008, if not more. With the S&P 500 finishing the year essentially flat, it was by far the best amongst major indices around the world.
Here’s a look at how some of the major indices finished in 2011:

• S&P 500 (U.S. Markets) Unchanged
• MSCI EAFE (Europe) -12.14%
• MSCI Emerging Markets -20.41%

Based on fundamentals, corporate profits, stock valuations, etc. our firm was very optimistic for the potential 2011 had to offer. Over the long term, stocks move on corporate profits. Based on that factor alone, 2011 should have been a great year. Record lows on interest rates should have also encouraged a positive move for equities. Yet, macro stories on U.S. and foreign debt trumped all.

Sloy, Dahl & Holst, Inc. took a firm stance on a handful of major themes at the beginning of 2011. First, we shifted all investments from foreign and emerging markets to the U.S. Then, we took an overweight on Financials, Real Estate, Technology and Energy. While we benefited from removing our allocations in foreign and emerging markets, as well as adding positions to our real estate fund, our investments within the Financial sector held back portfolio returns. We also saw many of our mutual fund managers, who have provided outstanding performance for many years, underperform their standard index (i.e. Technology, Energy, Large Growth, etc.). This was a result of an extremely schizophrenic year, with headline driven markets, making it very difficult to match index performance.

Moving into 2012, we expect it to be another volatile year. However, we also expect it to be a year that brings us much of the gains we were looking for in 2011. The fundamentals today continue to present a wonderful opportunity for U.S. equities. They have been making that case for well over a year now. In recent months we have seen very promising signs from housing permits and starts, manufacturing numbers, jobless claims, retail sales, consumer confidence, etc. The S&P 500 continues to trade at extremely low valuation levels, leaving exceptional upside potential for the next 12-36 months.

This market will move significantly higher. The biggest question is not if, but when. U.S. stocks have remained mostly out of sync with fundamentals, focusing on Europe and its sovereign debt crisis. However, once that focus starts to shift and Europe begins to develop a solution deemed satisfactory by the financial markets, we will move higher. In the meantime it will continue to require a lot of patience by the long-term investor, but you have to be in the market when it begins to make its move.

Please feel free to contact our office directly with any questions you might have. We are looking forward to a great 2012.

Ron Sloy, CFP
Sloy, Dahl & Holst, Inc.

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