First Quarter Newsletter - America's Favorite Pastime

The first quarter of 2012 has come to a close and we recently ushered in the beginning of spring. There are many events to look forward to this time of year -- new blossoms on flowers, seasonal cookouts, warm weather, and the official beginning of the baseball season. Now that college basketball’s March Madness has concluded, it is time to pull out the baseball mitt and turn more attention to America’s favorite pastime. Much has transpired in the off season as some wily veterans have decided to hang up their cleats for the next phase of life and others are starting careers with a new team. It would not be the beginning of baseball season (or any sport for that matter) without the baseball “experts” pontificating about which team will prevail at the end of the season. This is the part that always makes me smile. How in the world can anybody know at the beginning of April who is going to win the World Series in October?

The baseball season is a marathon as teams play 162 games during the course of the regular season. With so many variables in play, there is absolutely no way that any expert, let alone an ordinary baseball fan can determine with any degree of certainty which team will be crowned the World Series champion. While it might make for good television ratings or great water cooler conversation, would you want to attempt to pick a winner at the beginning of the season and be held to that selection at the end of the season? I would surmise the answer to the question would be, absolutely not. What if the star player gets hurt? What if the brilliant rookie prospect turns out to be a bust? You are stuck riding that selection into the sunset. Why then, would it make sense to invest your money that way?

At any time you can find financial experts on television talking about why this stock or that stock is going to be the best performing over the next five or ten years, or even over just the next year. Think about how much can change in just a year’s time, let alone an entire decade. From the beginning to the end of 2008 the S&P 500 lost 38% of its value. Similarly, from the beginning to the end of 2009 the S&P 500 gained 23%. Those are just one year time periods. Think about ten years. Who would have imagined in 1999 that the decade of 2000’s would post the first decade loss for the Dow Jones Industrial Average since the 1930’s? This is why it is so important to have flexibility in the financial markets, and more importantly a logical, organized game plan for navigating the markets.

The Domestic Equity market continues to present attractive potential opportunities. As of Mid-April, more than two-thirds of US stocks continue to trade in an overall positive trend as do the major stock indices. So, while the risk in the market is a bit higher than it was at the beginning of the first quarter of 2012 we will continue to, on a judicious basis, focus on US stocks as an area of opportunity in this market.
2011 was a poor year for the international markets; however, International stocks have been the most improved asset class so far in 2012, and the majority of the improvement has come from countries within the Latin America and Asia/Pacific regions. Countries like Mexico, Peru, Thailand, and Malaysia are among the strongest areas of the International market at this time
Lastly, I wanted to mention what is going on in the Fixed Income market. Interest rates remain relatively low; however, the question that is swirling around the market is not if, by when are rates going to rise? Due to the inverse relationship of bond prices and rates, when rates rise this will adversely affect bond prices. During the first quarter of 2012 long term US Treasury rates decidedly entered a positive trend, suggesting the rates are likely to continue to rise; however, this also means that Treasury bond prices have come under pressure.

If you would like to become more familiar with my investment process and the tools I use to identify market leadership across major asset classes and within asset classes, please contact me at your convenience. Otherwise, enjoy your spring, whether it is on the links or in the yard.

Jeff Bowers, CFP

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