The Quarter in Review

The new year started with an up-day as January opened, and except for the quick stumble that followed, most major stock benchmarks barely looked back. First quarter gains were 10.6% for the S&P 500 (with dividends), 11.3% for the Dow Jones Industrial Average, 8.2% for the Nasdaq Composite, and 12.0% for the Russell 2000.

Bonds, international stocks, and commodities were the other side of the coin. The iShares MSCI EAFE (EFA) gained 3.7% and iShares Barclays Aggregate Bond (AGG) barely squeezed out a 0.1% gain. Meanwhile, iShares MSCI Emerging Markets (EEM) racked up a -3.6% loss and commodity funds were down as well.

Stock traders were apparently relieved to have put 2012 behind them. Most of the major sectors put in double-digit performances for the first quarter. Technology and Materials are the laggards, although they did manage about a 5% gain each. Here are the sector SPDR results for the most recent quarter.

Health Care topped the quarterly list. It seems that as more of ObamaCare rolls out health care stocks are benefitting, at least for the time being. Health Care is considered one of the defensive sectors along with Consumer Staples and Utilities. The trio happened to be the three best performers of the quarter. Technology hasn’t been able to make much of an impression as of late, and that trend continues.

As the new year began, payroll taxes for everyone increased as did the tax rate on dividends, capital gains, and incomes over $400,000. In addition, sequestration started a little over half way through the quarter. Those items didn’t seem to have an impact in the first quarter, and we’ll continue to watch the markets to see what affect they may have as 2013 unfolds. According to the latest estimates, reaching the debt ceiling will not occur until the last half of September. If history is any indication, we won’t expect any Congressional action on this front until the third quarter.

The Quarter in Review

U.S. markets turned in a mixed performance for the final quarter of the year. The Russell 2000 managed a 1.4% gain for the quarter. The S&P 500 Total Return posted a -0.4% return, the Nasdaq snipped -3.1% off its annual gain, and the Dow Jones Industrial Average shed -2.4%. They all managed to finish the year with gains in the area of 15%, except for the Dow, which could only come up with about +7.3%.

The chart below reflects the nine sectors used to dissect the S&P 500 by SPDR Select Sector ETFs. Consumer Staples, Utilities, and Energy had a rough quarter, but the big loser was Technology at -5.7%. Financials posted the best gain and finished on top for the year as well.

The market was also mixed in reaction to some national events. President Obama was re-elected in November, but the markets weren’t thrilled. The Dow Jones Industrial Average fell 369 points during the day after the election on high volume, although it closed with “only” a 312-point drop. Even though Congress’s approval rating is in the 10% range, the market did like its action on the Fiscal Cliff fiasco. However, the last minute deal came too late for 2012 and the +308-point response of the Dow had to wait until 2013.

We were also treated to some comedy this quarter as it was proposed the Treasury mint a one trillion dollar coin, deposit it with the Fed, and lower our national debt by that amount to avoid Debt Ceiling debates. With the punch line delivered amid more groaning than laughing, the idea was eventually put to bed. Therefore, the markets will get their chance to weigh in on the Debt Ceiling debates over the next couple of months.

The Federal Reserve gave the markets a surprise when it announced its Zero Interest Rate Policy (ZIRP) will stay in place as long as the unemployment rate is above 6.5%, a level Mr. Bernanke believes won’t be seen for another two-and-a-half years. If you are searching for income in this environment, CCAM has a Dividend and Income portfolio that may be a good fit. Please call your account executive at 800-767-2595 if you would like more information.

U.S. stock markets had a rare two-day closure in early November in the wake of Hurricane Sandy, also known as Frankenstorm. The market hadn’t done that for more than 100 years, when the NYSE shut its doors for two consecutive days in 1888 due to weather.

The Quarter in Review

The 3rd quarter of 2012 turned in a very solid performance among U.S. markets.  The S&P 500 Total Return posted a +6.4% return, and the Nasdaq wasn’t far behind with a +6.2% gain.  The Russell 2000 and Dow Jones Industrial Average trailed behind by a couple percentage points at 4.9% and 4.3%, respectively.

SPDR Select Sector ETFs break the S&P 500 components into nine sectors.  The chart below utilizes those ETFs and shows the 3rd quarter performance of each sector.  Utilities is the only sector to post a negative return for the quarter, and Energy put in a commanding performance.

It would have been a very poor strategy to buy the 2nd quarter winner and sell the loser, as the exact opposite was the case for the following three months.  In the 2nd quarter, Utilities led the way at +6.5% and Energy was in the basement with -7.0%. 

The fourth quarter is getting off to a rocky start.  We are seeing a relatively poor earnings season so far with very few upside surprises.  The reported unemployment rate went down, but many analysts are doubting the numbers even more than normal due to the 665% discrepancy between the 873,000 jobs the unemployment report says were created and the 114,000 new jobs employers are reporting.   

Europe is still simmering on the back burner, and the Federal Reserve’s announcement of unlimited easing didn’t seem to have much of a positive impact.  The presidential election is certainly in the forefront of many people’s minds, and unemployment numbers that come out in November will provide some fireworks a few days before the election. 

The fourth quarter will be interesting to watch as the competing forces intertwine.  Perhaps more monsters and goblins will come out for Halloween than usual.

Articles by The Financial Times (Great Britain), The Globe and Mail (Canada) and The National Business Review (New Zealand) all lean on Ron and his expertise.  Okay, the last one is asking Ron about the Federal Reserve meeting from last week and not Deathwatch, but 2 out of 3 ain’t bad.  Perhaps Worldwide Ron will make an appearance in a country close to you!  Links to the articles:

The Financial Times

The Globe and Mail

The National Business Review

As Wall Street starts to follow the money, actively managed ETFs have started to pop up to woo investors.  Are actively managed ETFs finding their footing in this marketplace?  Do actively managed ETFs offer benefits to investors?  Steve Cordasco from TheStreet.com gets Ron Rowland’s help when covering these questions and the writer has some bold opinions.

A recent article by Jeff Schlegel from Financial Advisor magazine gets CCAM’s Ron Rowland take on this phenomenon and what to think of it.  As you may have read, Ron’s been busy this summer as his ETF Deathwatch tracks these closures and others that are on shaky ground.  Here’s a link to the article, and you may be surprised by Ron’s assessment.

Herb Greenberg at CNBC highlighted ETF Deathwatch in his blog Wednesday, August 15^th, and invited Ron as a guest contributor on the show, Street Signs, to talk about the subject of dying ETFs and their future impact to investors.  Below is a video link for those that may have missed it or if you want to watch it again.  You may want to sign up for Ron’s ETF Deathwatch before it’s too late or consult with CCAM to find out how we do it!

Investors Business Daily’s Trang Ho covers the specifics of the closure and profiles how to keep apprised of funds that are unhealthy options through our affiliate’s ETF Deathwatch.  Ron Rowland has been keeping this list for years, and it remains one of the best references for those who invest in ETFs.  What should you do if you’re caught in one of these ETFs scheduled for closure?  Here is a step by step guide on what to do.

DENT, sponsored by AdvisorShares, will be closing its doors on Wednesday, August 8^th after difficult performance throughout its near 3 year run.  Investor’s Business Daily’s Trang Ho and CCAM’s Ron Rowland discuss  its demise.  Of course, if you follow Ron’s blog this comes as no surprise as DENT has been languishing on Ron’s monthly ETF Deathwatch for well over a year.  Read all about it.