By: Michael Vodicka
“For the time being, the up trend is well in play, making the path of least resistance higher.”
2012 actually turned out to be a pretty good year for stocks. In spite of many headwinds, the S&P 500 managed to grind its way to a very solid 13% gain.
But looking forward, 2013 promises to be full of surprises, volatility, twists and turns.
The biggest concern is the debt ceiling. The last time Congress battled the debt ceiling, in August of 2011, the U.S. fielded a credit downgrade and the S&P absorbed a pretty brutal 19% sell off, only 1% short of bear-market territory. But this time around, expect the action to be even more intense. Congress has never been more divided and the Republicans lost big on the fiscal cliff, so tensions will be running high. Flat out, it’s going to be nasty, so expect a wild ride and plenty of brinksmanship, neither of which are going to make stocks real happy.
Beyond the debt ceiling, we have the usual insanity out of Europe and slower growth in China. Surprisingly, neither of these factors have gotten in the way of the bull trend that is now almost 4 years old. Take a look at the big gains below, where the S&P 500 is up more than 100% since bottoming out in March of 2009.
That has come as a big surprise to not only me, but plenty of other investors, analysts and portfolio managers.
And the reason for that is very simple: The fed.
The fed and other central banks across the world have pumped a river of liquidity into the market in the last four years to prop up the economy and stocks. And for the time being, that trend is well in play, making the path of least resistance higher.
Here is a quick run down of the biggest winners and losers in the S&P 500 in 2012.
- Visa, Inc. (V) +47%
- Amazon, Inc. (AMZN) +43%
- Apple, Inc. (AAPL) +29%
- Costco Corp (COST) +23%
- Celgene Corp (CELG) +21%
- Ingredian, Inc. (INGR) +19%
- Google, Inc. (GOOG) +18%
- AmeriscourceBergen Corp (ABC) +17%
- Wal-Mart (WMT) +16%
- Whole Foods, Inc. (WFM) +14%
- JP Morgan Emerging Market Bonds (EMB) 11% capital gain + 5% yield= 16%
- EZcorp (EZPW) -35%
- Baker Hughes Inc. (BHI) -16%
- Check Point Software Tech (CHKP) -12%
- Powershares DB Oil (DBO) 12%
That’s all for this week, but until next time here is an article discussing how tough a year 2012 was for hedge funds, who charge 2% of AUM (assets under management) and then take 20% of the profits. Mutual funds also struggled with 65% under performing the market. But the reality is that most mutual funds are just “closet index funds”, holding a few hundred stocks that basically closely mirror the return of a low-cost index fund while providing little performance benefits and charging a high fee. Enjoy!
Your Investment Partner,
Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment Advisor (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of Trade before spending five years managing equity portfolios for a private investment research company.
Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).