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Lindsey Report – Year End 2013


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Happy New Year!  I hope that you survived the deep freeze that has affected much of the country, and for many, a major winter storm.  I have shoveled enough snow to last me all winter.

Domestic equities staged a significant rally in 2013.  The S&P 500 rose 29.6% (Reuters), posting its best annual return since the late 90’s.  That is pretty amazing given that the economy improved, but was by no means charging forward.

In a diversified portfolio; however, domestic equities typically represent only a portion of investments, but there often allocations to other asset classes such as: domestic bonds (private and public), foreign stocks and bonds, emerging economies, real estate, precious metals, etc…   It is easy in a year like 2013 to get wrapped up in the performance of the Dow or S&P 500, but they are only part of the story.

For instance, Barclays Capital Aggregate Bond Index, (a broad domestic bond measurements) fell about 2% in 2013.  More specifically, long-term U.S. Treasuries were down over 7% (CNNMoney).  The Chinese stock market, as measured by the Hang Sang, was negative for the year, as were many emerging economies like Brazil (Reuters).

Europe fared better than China, as it appears that the German economy began gaining traction and some of the austerity measures in the Eurozone may be helping.  Nonetheless, broadly the major indexes in the Eurozone trailed our markets (CNN Money).

Recently, a client asked if I thought the S&P 500 would do as well in 2014 as in 2013.  Quite frankly, I don’t think so: I think our markets need to allow the economy to catch up and we likely need a healthy correction along the way.  However, some other asset class (for example: foreign equities) may assume the leadership role in 2014, which is why I continue to believe in diversification portfolio.

 

 

*The Standard and Poor’s 500 index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

*The Barclays Capital U.S. Aggregate Index is comprised of the U.S. investment-grade, fixed-rate bond market.

*The indexes mentioned above cannot be invested into directly.  Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.  Past performance is no guarantee of future results.

 

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