Richard C. Young & Co., Ltd. is a Naples, FL and Newport, RI based financial advisory firm. We have been ranked by Barron’s as one of the top independent financial advisors in the nation for the last eight consecutive years. We manage portfolios for individuals, families, and small businesses throughout the United States.
Monetary policy has been one of the most influential forces in financial markets over recent years. The Fed has shifted policy from the conventional (changing the fed funds rate) to the unconventional (money printing and communications). Unconventional policy maneuvers have proven to be a potent force in financial markets. This is especially true for the bond market, where Fed action has the most immediate and direct impact.
Last year was an unpleasant year in global equity markets. Modest gains in the S&P 500 (+2%) masked steep declines in most equity markets throughout the world. Of the 23 developed equity markets, only two were up in 2011—the U.S. and New Zealand. Of the 21 markets that fell, 17 were down double digits, with a handful of those down more than 20%. Emerging equity markets fared even worse. Of the 25 emerging equity markets that Young Research tracks, only three finished the year in positive territory. Close to half of the world’s emerging stock markets fell more than 20% in 2011.
One of the more common mistakes individual and even professional investors make is ignoring or underestimating future events. During the past three years, both the Dow and the S&P 500 posted positive returns. While 2012 could certainly be another favorable year, investors would be well advised to expect continued periods of high volatility.
Here is one problem facing investors: during August and September, the Dow Jones Industrial Average rose or fell by more than 1% on 29 days. By third quarter’s end, the Dow was down 12%, the largest quarterly percentage decline since the first quarter of 2009. This degree of volatility, which of course is great fodder for the media, can lead to knee-jerk decisions that send investment strategies off course.
Over recent years, we have advocated and pursued what we consider to be a defensive investment strategy. Our caution has centered on the troubling condition of the global economy. Today, the world’s largest economic players face powerful structural headwinds likely to constrain economic growth. Yet many economists, policymakers, and investors have operated with an optimistic outlook. We contend that problems exist and that many financial assets are not reflecting this reality.
NAPLES, FL
5150 Tamiami Trail North, Suite 400
Naples, FL 34103
Phone: (888) 456-5444 Fax: (239) 213-0770
NEWPORT, RI
98 William Street
Newport, RI 02840
Phone: (800) 843-7273 Fax: (401) 849-0002
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