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A Time for Strategic Planning

12/12/2011

The capital markets completed a headline-driven choppy week on Friday, December 9. The S&P 500 Index® (Fig 1.1) closed marginally lower for the week, down less than 1%, at 1255.19.

I expect it was an extremely frustrating week for those investors still focusing on finding 2011 opportunities rather than spending time crafting a strategic plan for 2012. The phone lines should be abuzz and emails flowing with your investment team. Now 343 days into 2011, the market has identified its winners – investment grade corporate bonds, municipal bonds, utilities, technology, energy, and consumer names. By no means should one expect that strategy to change in the final 22 days of 2011.

As far as Europe (Fig 1.2), the European Union and ECB keep giving the market (Fig 1.3) just enough optimism to keep investors coming back, but not enough make them stay for good. I expect that condition remains with us as January rolls around – speaking of which,  as I continue my process of strategic planning for 2012, whatever yellow brick road I travel will begin with hearing the results of corporate earnings, starting Monday, January 9.

In the meantime, I suggest continuing to monitor weekly initial jobless claims (Fig 1.4) and certainly the unemployment report on Friday, January 6. Some seeds of optimism have been planted here in the fall that a possible turn toward an improving labor market could be unfolding.

Fig 1.1 S&P 500 Index year to date – Watching the 200 day moving average at 1263.31  

Source: Bloomberg

Fig 1.2 EURO year to date – Watching the support levels from late November @ 1.3212 and early October @ 1.3146

Source: Bloomberg

Fig 1.3 Italian 10-year Government Bond – Watching yields fall in December from above 7.25% to below 6.50%

Source: Bloomberg

Fig 1.4 Initial jobless claims year to date – Watching the recent improvement to lowest level since late February 2011

Source: Bloomberg

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