Through the Looking-Glass, Heading Toward a Better Tomorrow
2012 Economic and Stock Market Outlook
 
 


Paul E. Purcell
Baird Chairman, President & Chief
Executive Officer 
 

A message from Baird’s CEO, Paul Purcell

Extreme market volatility turned 2011 into a wild ride for many investors. And, with the Presidential election on tap for 2012, we may not begin to see clarity around many of the domestic unknowns fueling that volatility until November. Then, of course, there’s the Euro-zone to consider.

This is not to say investors might be better off spending the year on the sidelines. As we’ve seen, market volatility swings both ways, and an informed strategy built on sound principles and with the flexibility to capitalize on opportunities as they arise will be critical to successful wealth management.   

The insights provided in the 2012 Economic and Stock Market Outlook are designed to help you understand Baird’s perspective on the market environment, and where we see both opportunities and challenges ahead. These ideas come from our leading minds on the economy and investing and they are consistent with the disciplined, risk-managed approach we’ve taken to keep Baird strong and stable for clients like you through unquestionably trying times.

If you have any questions about the implications for your specific situation and portfolio, please do not hesitate to contact your Baird Financial Advisor.

We thank you for the trust and confidence you have placed in us. Please know that we strive to earn them every day. 


Through the Looking-Glass, Heading Toward a Better Tomorrow
2012 Economic and Stock Market Outlook

In the Lewis Carroll classic, Alice, fresh off her adventures in Wonderland, finds herself one snowy evening wondering about life on the other side of the mirror that hangs over the fireplace. She climbs atop the mantelpiece and discovers that she can step through into a looking-glass world. Once there, Alice encounters a reality that is anything but normal. Left is right, forward is backward and a new set of rules apply. We too find ourselves pulled into a new environment, one that if not so real would seem to be a farce. Consider these situations which we have seen in 2011: 

    • A country gets its sovereign debt downgraded, but yet yields on that debt fall sharply. 

    • The parliament in the second-poorest (based on per capita output) country in the EU (Slovakia) casts the final and decisive vote for a European stability fund that at the time seemed crucial to the ongoing viability of the EU and the Euro. After first rejecting the measure, the Slovakian parliament in the end approved it.

    • The United States, which has funded operations of late more by continuing resolutions than a comprehensive budgeting process, and has had to borrow 38 cents on every dollar spent over the past three years (in the process accumulating $4 trillion in new debt), is now lecturing the EU and its member countries on the need for fiscal reform and getting debt and deficits under control.

This is our “looking-glass” world of today. It is not normal – in a new sense or old – but is real. It is not permanent but it persists, and we must operate within it. Just as Alice had to learn how to negotiate her way across the chess board and toward her destination, so too must we navigate the financial markets. Even as we look forward and move toward a better tomorrow, we confront our current reality.

As we consider that better tomorrow, we see changes just over the horizon that could reflect a secular shift for the economy and the financial markets. Right now, the need for change is being recognized primarily at the grassroots level, so figuring out the exact scope and timing of that change will take more time, as will convincing the powers that be of the need for change. The major grass-roots efforts that have emerged across the country over the past couple of years (principally, the Tea Party movement, and, more recently, Occupy Wall Street) are, in our view, different manifestations of a similar sentiment. Underlying both is the sense that the current political/economic/corporate structure needs massive reform, beginning with a disentangling of special interests and entrenched politicians. 

Read more 		        

                                      
Insights from:


Bruce Bittles
Chief Investment Strategist



William Delwiche, CMT, CFA
Investment Strategist

 
2012 Outlook Summary

Risk on S&P 500 to 1000,
Reward to 1400.

Election and European Debt
Uncertainties Are Dominant
Risks in First-Half. Headwinds
Could Abate Later In The Year.

GDP Outlook – Lack of Income
Gains Could Cap U.S. Growth
At 2%. Europe In Recession.

Secular Base-Building Means
Volatility Unlikely To Ebb; Manage
Portfolios For Risk As Well As
Return.

2012 Outlook
Download the full
2012 Market Outlook

                                      

 

 

 

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