S & P 500 at 5 Year High

Weekly Update – January 14, 2013

Markets were upbeat last week, closing positive for the second week in a row as traders digested the
first fourth-quarter earnings reports and fresh economic data. The S&P 500 was pushed to a new five-year high, gaining 0.38%, while the Dow rose 0.4%, and the Nasdaq increased 0.77%.[i]

The debt ceiling debate is already in swing, with headlines dominated by the idea of minting a trillion
dollar coin as a way to sidestep a vote on the ceiling. The comedic suggestion was made in an act of political one-upmanship but isn’t a true solution. We hope that with that suggestion out of the way, Congress can get back to its job of making necessary decisions to tackle the deficit and put the U.S. back on firm fiscal ground.[ii]

With equities at five-year highs, it’s time to start thinking about whether the fundamentals can support
further upside. Next week, analysts will turn their attention to a slew of economic reports and more earnings data. According to FactSet Research, S&P 500 companies are expected to report overall earnings growth of 2.4% for the fourth-quarter of 2012. This is much better than the third-quarter’s 1%
decline; however, much of the growth is expected to come from the financial sector, meaning that other sectors are expected to see growth of just 0.2%.[iii]

Perhaps even more important than the data will be the attitude of business leaders about their prospects
this year. Their opinions could provide us with an important clue about growth prospects for the U.S. and global economies. Analyst opinions are mixed, as some expect an upbeat outlook from businesses, while others think we’ll see more guarded opinions.[iv]

Analysts will be also listening closely to Ben Bernanke’s first appearance of the year; scheduled for Monday,
January 14, 2013 at 4:30 PM. The Fed chairman will be speaking about the economy, and some Fed watchers believe he may discuss a potential end to the Fed’s asset-purchase program.[v]

Whichever way markets move in the coming weeks, we’ll be paying close attention and seeking out opportunities where they arise. While we’re pleased with the way markets have performed thus
far, we’re always on the look out for reversals and turbulence, and we strive to build portfolios that can withstand short-term gyrations.






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