This year has been my seventh year writing “Your Mind on Money.” Also, 2012 was also the year I elected to move the column to The Times, which has proven to be a smart move.
I am grateful for the opportunity to continue writing for Times readers and I am grateful for the guidance I have received from my friends at this great region newspaper.
Each year around this time I make some predictions regarding my expectations for the financial landscape over the coming year. Around this time each year I also recap the predictions made previously and give myself self-assigned “grades.”
Before I engage in this process, first let me say that predictions are just that, predictions. I believe a solid investment strategy is built upon a long-term foundation and combined with shorter-term tactical maneuvers designed to enhance opportunity or manage risk. It is folly to let short-term calls control all investment decisions.
That being said, it is the short-term calls that provide most of the “entertainment” value for investors, so for entertainment purposes let’s see how I did.
I predicted American companies would remain in an earnings “sweet spot” supported by low interest rates. I also predicted stock market volatility in late spring and a finish around 13,100 on the Dow.
Well, I quite frankly nailed this one. Corporate earnings have moderated but continue to grow and meet expectations. We did see volatility starting in March with initial highs for the year coming in late spring. The Dow currently stands at 13,250 with six trading days left. I think I get a solid A on this one.
I also predicted the dividend play was a little long in the tooth and that we would perhaps see small and mid-cap stocks outperform. This can be evaluated by comparing the Dow Jones Select Dividend Index which was up 10.24 percent to the Russell 2000 index which was up 14.23 percent, another A in my opinion.
I predicted bond investors would be best suited with intermediate-term high quality bonds and preferred stocks. Well, intermediate term bonds posted 3.53 percent returns while longer term bonds returned 8.16 percent, and many preferred stocks ended up being called in 2012, which in most cases was not a good thing. I guess this one is a C.
I predicted China’s growth would slow but not fall off the cliff (correct), and other Asian economies would offer more opportunity. Well the Asian ex Japan index returned 17.42 percent in 2012, and China 3.42 percent. Another A rated call.
I said I wasn’t brave enough for Europe, up 10.51 percent, but liked Canada, up 8.37 percent. I guess this another C.
I also predicted more quantitative easing, which we did get and slight gains in gold and silver up 16 percent and 22.96 percent respectively, another A. I must say.
So three A's and two C’s, considering the insanity in inherent in the subject, not bad. Next week we look at 2013. Merry Christmas.