January 24, 2012
Alamo Capital remains cautiously optimistic in the New Year. As the volatility continued, the fourth quarter of 2011 saw some riskier assets begin to rally. The Volatility Index (VIX), a measure of the volatility of the S&P 500, peaked in August 2011 at a level of 48, shortly following the downgrade of U.S. debt. While the fourth quarter saw volatility bounce around, the VIX finished off 2011 closer to the 10-year moving average, at a level of 23. The VIX index is sometimes referred to as a gauge of investor fear, and we are recognizing less uncertainty now than in the past couple of quarters. Equity markets bounced off their annual lows in the fourth quarter of 2011, and managed to perform relatively well, particularly domestically.
Looking into 2012, we will continue to monitor the risk on and risk off behaviors of markets. As was the case in 2011, the European sovereign debt crisis, job numbers, real estate, and government policy will help lead the direction of the economy. Europe is gradually getting closer to a resolution, and investors have faced the fact that holders of Greek debt will have to take a loss. The question remains, how big? Unemployment fell to the lowest rate in 3 years, ending 2011 at 8.5%, led by manufacturing and mining jobs. The creation of middle class jobs is a great data point for our consumer driven economy. A rebound in real estate continues to struggle. Representing many consumers’ largest asset, real estate is still being held down by a backlog of foreclosures nationwide and an insufficient number of buyers for the inventory available. Domestic companies continue to have strong balance sheets, and economic data releases are demonstrating an improving trend.
Government policy could take a turn for the better in 2012. The Federal Reserve has pledged to be more transparent, and give further insight into the timing of their interest rate moves. The so-called “SuperCommittee” failed to come to a conclusion on how to cut $1.2 trillion from the Federal Budget, but progress could be made throughout 2012, and the U.S. government is able to fulfill all of its obligations today, despite running a deficit in excess of 30%. In addition, with the U.S. Presidential race in full force, I am hopeful politicians will start to send clearer signals to markets, and help remove some of the uncertainty they helped create over the past year. Despite some of their actions, politicians do tend to want a product of their work be a healthy economy.
Regardless of the direction of the Economy, know that Alamo Capital is here to serve you and your needs. As economic conditions change, we adapt to find the optimal investments to help our clients live their lives. We strive to keep you informed of the changes in the market place, and help you understand your investments. Talk to your Alamo Capital investment specialist today to comprehend how your investments can help you achieve your goals.
This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service. Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital. Past performance does not guarantee future results. Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.