I made several posts about so-called experts from Goldman Sachs and people like David Kotoc (August 2, 2011) who made lofty predictions about the level of the stock market, explaining how they were going to be wrong. Here we are at the end of the year, with only 2 trading days remaining, and with the S&P 500 at 1,258. We are exactly flat for the year – we started at 1,260. Kotoc, Goldman, and others, had predicted we would be at 1,450 at this time. Goldman maintained their 1,450 prediction even after Abbey Joseph Cohen, also with Goldman, reduced her expectations for GOD growth for 2011. I had hoped to see 1,300, or perhaps 1,350, but am not surprised at all that we are flat for the year.
Looking ahead, I am much more optimistic about 2012. I believe we will see much stronger stock performance this year, with as much as 20% gains on stocks for the year. This would put us around 1,500 on the S&P 500. I would not be surprised to see that level on the S&P 500 this year at some point. I see 2012 as a transition year for the U.S. economy, with 2013 a more consistently positive year for economic growth. Stocks should anticipate this however, and should trade well during 2012, and especially during the second half of the year, anticipating better economic times in 2013 and beyond. Higher growth sectors of the economy should perform best, including technology, consumer discretionary, industrials, and yes, even financials – you cannot have a sustained recovery int eh economy without the banks financing it. We are a financial system of credit and without access to credit, our economy will not grow.
Holiday spending, as expected, looks solid. We will get the final reading around January 12th, but preliminary reports already show strong growth is sales, especially online sales, which are up around 15% to 16% over last year. Consumer spending accounts for 70% of the U.S. economy, and is vital to a sustained recovery. Strong consumer spending translates to strong earnings growth for stocks as well.
All in all I am pleased with how 2011 has unfolded from an investment standpoint. I will have my final investment performance numbers shortly, but I have outperformed the market dramatically this year. I am very pleased for my clients. This has been a challenging time for everyone, so it is nice to have some very attractive gains for the year indeed!