US Stocks on a Tough Road Back

12/09/2011 8:30 am EST

Focus: MARKETS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

While 2012 will be a long year, just as 2011 was, by no means are we guaranteed to have another major crisis, at least in the US, reflects Jim Lowell of Forbes ETF Advisor.

I admit it. I have been digging a hole for myself, a hole that others will be affected by, too. As a hole digger, I have a long literal and figurative history of both poking and digging them

From fence posts to missives posted, it’s not hard to find holes in much of what I do. And, of course, I spend a lot of my professional time pointing out that all those who claim to be holier than thou are telling nothing more than their version of the truth.

This go round, the hole I’m digging has a lofty purpose. It is for a new tetherball post, a top request of my son and his cohorts. And wouldn’t you know it, as I was pumping up the ball and casting my gaze inward, I found myself envisioning a tetherball that was the image of our world, propelled pell-mell by opposing politicians, swinging on a string.

Moving forward, fundamentals will have to contend with the negative consequences of the lack of political leadership to chart a better domestic and global economic and market course. Here at home, our failed supercommittee did state they all agreed that there is a crisis.

My analogy: those on the left and right side of the house agree that the house is on fire, but no one is willing to turn the hose on. Into the fray, our fire chief decided that turning the hose on each other might mean he won’t get blamed for the ashes. In an apt phrase from the football show Monday Night Live, C’mon man!

Thanks to politicians, domestic and foreign, a tough year got tougher. Eurozone politicians not walking away from their economic leadership obligations, the linchpin to our ability to gain year-end ground, are back to flailing and failing not only their particular constituency and region but us as well.

The global market’s meter is back to running from abject fear to worrisome instability; hardly the stuff new investments (let alone investor confidence) are made of, and clearly the kind of mix that can harden into a double-dip recession next year.

Add to that mix the mortar of Middle East and North African challenges, as well as our own politically expedient and expedited class-warfare conundrum, and it’s not hard to reconfirm my view that 2012 is going to be a trying year.

Trying years are nothing new. They’re also not to be inflated to anything like guaranteed losses. In fact, the prospects for gains in the second half of next year could increase if the first half does succumb to recessionary pressures (real or imagined).

And while talking about the second half of next year sounds like a distant projection, it really falls into a timeline that is so short as to be of little formative guidance for long-term growth investors. For income-oriented investors, however, there is no such thing as a long-term only timeline.

There also is always the pressing concern of how to yield enough income today without sacrificing the capital appreciation needed to sustain that income stream for 10, 20, or even 30 years after one’s income-producing days are over.

Granted, the world writ large or circumscribed to one’s particular plight is currently pockmarked with pitfalls, and looks awfully short on promise. Last month, this month, this year…not a cakewalk. But, that doesn’t mean there aren’t better ways to manage through the rough patch. And manage we will.

In contrast to the Eurozone, November saw our own GDP come in weaker than expected, but it’s still posting and positing slow growth, not no growth. As such, even November’s GDP report bested consensus fears.

Income and spending and even consumer sentiment reflect belief in tentative expansion not contraction, not yet anyway, and confirmed a theme I remain keen on—consumers are beating consensus fears time and again. The proof? Black Friday store sales and Cyber Monday clicks blew through bearish estimates.

Meantime, private-sector payrolls gained as planned layoffs eased in November, indicating that even a stall in the job market, as opposed to a fall, can raise hopes for recovery.

My view: After a blockbuster October, where gains blossomed on nearly every bough, it was not all that unexpected to find November making minced meat out of a portion of those gains.

And while it’s easy, and I think right, to say that for long-term investors, the day-to-day sturm und drang could look like a tempest in a hindsight tea pot, it sounds increasingly hollow—maybe even addled—to say so.

That doesn’t make it untrue, mind you. But it is getting harder to believe for some.

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