After a year that was anything but pleasing for most investors, 2012 got off to a good start. Here is how the models look after four days:
Top 20 tracked smaller stocks for the most part. As the title alludes, there was a shift in leadership this week, with last year's big dog, Financials, taking off. In Top 20, we don't have substantial exposure (it's about equal to the S&P 500, but no beaten-down money-center banks), and one of our two names actually declined during the week. The model had beaten the market for each of the past five weeks, so a slight lag this week isn't too concerning. In addition to the lack of performance in our Financials, Small-Cap lagged, which was contrary to my expectations. In fact, some of the big losers in 2011 failed to bounce, which really surprised me, though others did. We had one company pre-announce a bad Q4, but it recovered quite nicely after opening much lower today. Earnings season begins next week and will certainly bring heightened volatility to individual stocks. Top 20 names begin to report in the following week.
Conservative Growth/Balanced was well positioned, as bonds, which are a small part, fell slightly during the week, while stocks, which are almost 75% of the model, were strong. Our Technology names did well, but our Healthcare companies didn't. In general, it wasn't a great week for "dividend-payers", with a bit of mean-reversion after a strong year.
Sector Selector ETF posted a strong week, thanks almost exclusively to Financials, which was the leading sector. It's too early to tell how sustainable this trend might be. Our Small-Cap and Emerging Markets exposures offset the big contribution.
Market Outlook
After extensive written and verbal commentary last week, I will lay low this week. So far, so good!
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Regards,
Alan Brochstein, CFA
www.InvestByModel.com
