Market Watch – December
Historical stock market data shows that extended periods of market weakness are followed by market strength, according to an article at Kiplinger.com by Jeremy Siegel, professor at the University of Pennsylvania’s Wharton School. Siegel found that when stock returns for the preceding five years fall in the bottom 25% of all five-year returns, as was the case for the S&P 500’s -1.24% cumulative total return from 2007-2011, the annualized return on stocks over the following two-year period is 20%. That is a little more than double the S&P 500’s long-term average gain of 9.9%.
What’s the lesson? Successful investors stay in the market at all times. Nobody knows when the market will take off, or turn sluggish. Those that try to ‘market-time’ get slaughtered 100% of the time. Since most people have no idea what they’ll eat for dinner tomorrow night, the same goes for the stock market. Nobody knows what it will do tomorrow, nor 1 year.
Focus on your goal, asset allocation, rebalancing and forget all the day to day talking head predictions. Remember, it wasn’t that long ago Jim Cramer said to get out of the market, nothing good will happen. So, how many thousand points did the market go up since he said that?? How many thousands of dollars could his advice caused investors to never get?
Investors should keep it simple. If you do the ‘right’ things, you don’t need to do ‘all’ things.
Free Market US Fund 16.68%
Free Market International Fund 14.51%
Free Market Fixed Income Fund 2.22%
Dow Jones Industrial Avg. (13,155) 10.59%
S&P 500 (1418) 15.19%
NASDAQ 100 (2641) 17.34%
S&P 500 Growth 14.36%
S&P 500 Value 16.34%
S&P SmallCap 600 Growth 11.41%
S&P SmallCap 600 Value 14.82%
MSCI EAFE 14.61%
MSCI World (ex US) 13.97%
MSCI World 14.18%
MSCI Emerging Markets 14.63%
6-mo CD 0.48%
1-yr CD 0.74%
5-yr CD 1.37%
MLCD (Market-linked FDIC CD) -call for details. MLCD’s are paying around 4 times higher interest than traditional bank CD’s