2009 - Year in review

Doug Horn

For almost the first quarter of 2009, everyone was wondering just how bad it will get. Shopping for the luxury items just about came to a standstill. The number of cars being sold slowed to a pace not seen in decades. Unemployment was climbing with predictions by some the rate would reach depression type levels. By March 9, the S&P 500 had fallen 25.10 percent since the start of the year, and this was after significant declines in the later part of 2008.

Few people could envision the opportunities that laid ahead for investors. The markets did what it always does and that is shake out the novice investors and those seeking high returns but unwilling to incur losses. Many had been running to the sidelines for months, and I am sure some were vowing never to invest again. The unemployment rate is still double digits, (10.0 percent), and while down slightly from earlier months will most likely increase before trending lower.

As of the week of the 21st, the S&P 500 was up 23.34 percent since the start of the year. Obviously erasing significant losses and providing unprecedented gains since its March low. Those of you, who quit opening your 401-K statements and did not make any changes, may actually have a great year. Depending upon the allocation, the account may have participated in this incredible rally, and new contributions benefited the most since many bought into the account while it was near the bottom.

This past decade may also be setting a new record. Most likely, this will be the first decade where the S&P 500 shows a loss for the period. The record is not surprising when a review takes place. There were two significant bear markets with the first started by the “tech bubble” and the second by our most recent financial crisis. The events of 911 also occurred during 2001. This measure of course is the index’s performance, and not personal returns.

Between now and the end of the year it is difficult to predict where the index will close. Daily reporting of financial news does impact the direction of the market and both disappointing as well as surprises may hit the news wires. But more importantly, window dressing by institutional managers as well as tax selling may impact the markets just as much. Many institutions may have missed the recent rally and instead of showing the actual positions held during the year, they may buy into the markets selecting some of the year’s winners. This window dressing does little for performance, but may shield the managers from too many questions. Those that did participate in the rally may find it desirable and beneficial to sell profitable positions and use the gains to offset earlier losses. These sells may drive the markets lower temporarily.

Whether your portfolios participated in this year’s rally or not, the market still has significant room for growth prior to returning to past highs. It will require a 40.4 percent move in the S&P 500 to reach the peak value of 1,565.15. For long term investors, it is clearly best to buy back into the market at today’s level, than to wait for confirmation of the recovery and miss much or most of the gains.

For assistance with insurance, estate planning and managing investments, contact Quality Financial Concepts or one of the other Certified Financial Planners in our area. You can also view our learning center on our website, www.goqfc.com. There you will find articles on a variety of topics, on-line seminars, calculators, as well as a host of other free tools.

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