Meridian Star

December 15, 2013

A market to be thankful for

By Gerry Mitchell
The Meridian Star

MERIDIAN — In financial terms, 2013 has been a very nice year – a year in which the economy, the housing and business sectors and the stock market have all improved. Looking back over the year to date, it is particularly amazing to see how stocks have soared in the face of many challenges – some of which proved tougher than others.

    Wall Street is enjoying a banner year. November wrapped up with the S&P 500  up more than 29 percent YTD and 32 percent in the past 12 months. If the S&P gains another 2 percent by year’s end, it will have its best year since 1995. Even if the index has a flat December, it will have its best year since 1997. In addition, it has climbed 166 percent from its March 2009 bear market low to the present.

    Opening an even wider window, the total-market Wilshire 5000 index closed at 19,210.45 on November 27, 180 percent above its March 2009 low of 6,858.43. The optimism has truly carried worldwide: global equities have gained more than $8 trillion in value during 2013.

    Once again, patience has been the investor’s friend. Even in a good year for stocks like this, you still have to keep from being rattled by the headlines. If you visit some of the popular financial websites with any frequency, you may have seen warnings of a new stock bubble, prognostications that 2014 will bring minimal stock gains, and so forth. This could possibly prove true; then again, those assertions may look foolish six months from now.

    Dire warnings (and memories of 2008) do make people cynical about stocks. In a recent University of Chicago/Northwestern University quarterly investor survey of 1,000+ respondents, just 17 percent said they trusted Wall Street. In comparison, 34 percent said they trusted banks.

    In a strange way, this degree of distrust could be a good sign for the health of the bull market. Historically, individual investors are impatient – they get out of stocks too soon and get back into stocks too late. Analysts pay attention to their inefficient market timing. When even the most timid bears are putting money into equities, it may be a sign that the bulls are getting tired. It doesn’t seem that we have reached that point yet. The Investment Company Institute has recorded net inflows into mutual funds for 2013, but that follows six straight years of net outflows.

    For stocks, 2013 is kind of like 2012 – only better. This year, Wall Street has put up with a federal government shutdown, a crisis in Syria that threatened to require a U.S. military response, the sequestration cuts, anxiety from the Cyprus banking quagmire, and constant worries about the Federal Reserve halting its economic stimulus. Here we are in December, the Dow is close to 16,000 and the S&P is close to 1,800. In 2012, you had the fiscal cliff looming, household income hitting a 17-year low, new recessions in Japan and Europe, slower growth in China, and bond guru Bill Gross talking about “the death of equities.” Even so, the S&P rose 13.41 percent on the year.

    Be thankful. Many Americans have seen their job prospects, finances, and communities improve this year. Whether you are bullish or bearish, whether you are wealthy or building wealth, whether you are retired or saving for retirement, this is something to be thankful for.

   

    Gerry Mitchell, CFP®, AAMS® is a Financial Consultant with Community Investment Professionals and may be reached at (601)693-0200 or gerry.mitchell@invpro.com.