News Releases
Monthly Investment Update December 2011
Markets in Review
Equity market performance was mixed in December. Positive interpretations of U.S. economic data and the European debt crisis summit helped start a latemonth rally-the S&P 500 Index recovered from its December low of 1,205 to close out the year at 1,257. Although the S&P 500 was effectively flat for the year (down 0.003%), when taking into account the index's dividend yield, it returned 2.09%. Foreign equities generally lagged U.S. stocks, in part due to a strengthening U.S. dollar. The traditional high dividend yield defensive sectors (consumer staples, utilities, telecom and healthcare) handily outperformed the other six S&P 500 sectors on a total return basis for both the month and year.
Bond prices generally benefited from a continued decline in intermediate and long-term Treasury yields, as the U.S. Treasury yield curve continued to flatten in December. The Barclays Capital U.S. Corporate High Yield Index rebounded from its November loss by gaining 2.66%. The Barclays Capital Municipal Bond Index finished the year with a 1.90% return in December and 10.70% for the year, which made municipal bonds one of the best performing asset classes of 2011.
The commodity asset class was a notable laggard for the month and year, with the Dow Jones-UBS Commodity Index down 3.75% in December and 13.32% for the year. With the exception of palladium (up 7.07%), precious metals experienced a significant pull-back in December, with gold, silver and platinum declining 10.46%, 15.09% and 10.15%, respectively.
Alex Rasmussen, CFA CPA
Senior Investment Officer
| Market Stats1 ((as of 12/30/11)) (source: Bloomberg LP) | |||
|---|---|---|---|
| MTD (%) | YTD (%) | 3-year cumulative (%) | |
| DJ Industial Average | 1.58 | 8.34 | 51.67 |
| S&P 500 Index | 1.02 | 2.09 | 48.59 |
| S&P 400 MidCap Index | -0.38 | -1.74 | 70.93 |
| Russell 2000 Index | 0.66 | -4.19 | 54.57 |
| EAFE(net) Index | -0.95 | -12.14 | 24.75 |
| DJ-UBS Commodity Index | -3.75 | -13.32 | 20.42 |
| BarCap US Aggregate Index | 1.10 | 7.84 | 21.71 |
| BarCap High Yield Index | 2.66 | 4.98 | 91.20 |
| BarCap Municipal Bond Index | 1.90 | 10.70 | 27.97 |
| Gold (spot price change) | -10.46 | 10.06 | 77.28 |
| WTI Crude (spot price change) | -1.52 | 8.15 | 121.59 |
| U.S. Dollar Index (DXY) | 2.29 | 1.46 | -1.39 |
Action Items
"Things will probably come out all right, but sometimes it takes strong nerves just to watch." – Hedley Donovan, former editor-in-chief of Time, Inc.
Strong nerves, indeed, were required in 2011 as worldwide macro events converged to spur on volatility in the equity markets only to result in very flat returns for diversified investors. The list of events would include:
- The Euro currency union close to falling apart
- A deadly Japanese earthquake and tsunami
- The U.S. losing its AAA status
- Congressional agitation over raising the debt ceiling
- Super Committee failing to agree on debt reduction
- Austerity measures triggering global protests
- The tumultuous Arab Spring
- The Fed and ECB providing unprecedented liquidity
- The MF Global scandal and bankruptcy
- The deaths of Osama Bin Laden & Kim Jong Il
- And even a Royal Wedding!
In December we initiated a number of prorata investment moves to redeploy our cash held back into 1) a broad-based "go anywhere" equity mutual fund which will add an element of alternative investing to client portfolios, 2) additional shares of an oil services ETF, 3) additional shares of two metals and mining mutual funds, 4) shares of a Dow Jones Industrial Average ETF and 5) shares of a real estate investment trust (REIT) ETF. These moves have been implemented to increase overall exposure to equities and enhance dividend cash flow.
As the calendar turns to 2012 we are poised for a "muddlethrough" type economy with potential for the U.S. to outperform in the first half of the year. We believe cash flow, energy, healthcare, technology and natural resources will be good places to emphasize going forward. Uncertainty over the Presidential election, possible Fed intervention, job creation, debt woes in Europe and the cauldron that is the Middle East will continue to bear close watching as the New Year unfolds.
Jerry R. Bayer, CFA
Vice President, Lead Investment Officer
Mr. Rasmussen and Mr. Bayer are discussing the markets at a macro-economic level. They are not recommending or endorsing the purchase of any individual security.
Trust and investment management services are not deposits, are not guaranteed by Thrivent Financial Bank, are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other federal governmental agency, and may go down in value.
Trust and investment management services are offered by Thrivent Financial Bank (Member FDIC, Equal Housing Lender), a wholly owned subsidiary of Thrivent Financial for Lutherans and an affiliate of Thrivent Investment Management, Inc. Neither Thrivent Investment Management, Inc., a FINRA member, nor its associated person(s) is offering any product hereby. Certain Thrivent Investment Management, Inc. associated persons act as solicitors for Thrivent Financial Bank.
1 Total returns are shown for equity and fixed income indexes; total returns reflect the reinvestment of dividends and income. Returns presented on a cumulative basis (not annualized). Past performance is not indicative of future results. Individuals cannot directly invest in any index.
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