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The Lindsey Report December 2012


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Article by, Cleaton Lindsey

Trust that you and yours had a happy Holiday Season and will enjoy a prosperous 2013.    The equity markets, as measured by the S&P 500, the Dow and the Nasdaq Composite enjoyed a prosperous 2012 with each showing positive returns (+13.4%, +7.2% and +15.9%, respectively (Reuters)). Please refer to your year-end statements for values and call if you have questions.

Clearly the dominant economic headline, leading to the end of the year and to start the new one, was the “fiscal cliff”.  Fortunately, the lame duck Congress was able to take steps that, for now, have enabled us to avert the major tax increases that were part of the “cliff”.  The equity markets cheered this news with a very significant two-day rally (+474pts or 3.6% on the Dow (Reuters)).  This rally is likely similar to all of us going “whew, they didn’t drive us over the Cliff”.  I’m certain I felt 3.6% better hearing that they were actually going to make a compromise.

Unfortunately, they chose not to address our overspending and kicked-the-can on that responsibility.   However, they did give the new Congress an additional two months to address the issues before automatic spending cuts take place (those that were scheduled to take place at the start of 2013).  Oh Yeah, they have to deal with the “debt ceiling” issue all over again too.

If you recall, in the summer of 2011 (when they last debated the debt ceiling) the equity markets experienced turbulence for several months, in addition to our debt being downgraded.   Surely, Washington wants to avoid a repeat performance.  They seemed to understand that the “cliff” was a big deal and were willing to compromise, so in the Spirit of the New Year, I am cautiously optimistic that they will get something done.

In addition, there are reasons for optimism, regarding the economy.  For starters, The Labor Department reported that we added approximately 1.8mil jobs in 2012 with employment accelerating in the final quarter over Q2 and Q3.  The Institute for Supply Management’s December report showed the highest, non-manufacturing reading in a year (57.1).  Regarding manufacturing, Polk Auto Research reported the auto industry experienced its best sales since pre-recession and estimates are for a better 2013 (15mil+).  The housing market experienced stabilizing and/or rising prices in many parts of the economy.  Therefore, if our friends in Washington don’t torpedo it, I think the economy could positively surprise us in 2013.

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual.  To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.

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