We believe the stock market is poised to do just fine in 2012. We’ve studied previous markets where growth has moderated and the markets continue their upward gain. In the past, we’ve seen companies announce conservative guidance and then substantially out-perform. Now because of Sarbanes-Oxley, companies are pulling back. We believe we will still get a few surprises in consumer staples, industrials and maybe even materials.
Currently, profits are $107 for S&P companies, and the stocks are trading at 13.6 times earnings. We are predicting a target of 1485 for the S&P this year, and the Dow around 14,000. By no means do we think the market will have a straight ascent; however, we do not believe it will be as volatile as 2011. There are several main concerns that may affect both investor sentiment and market performance throughout the year, including Iran’s threat to cut off the Strait of Hormuz, Europe’s continuing debt crisis and our own presidential election. We believe it will be an interesting year, but perhaps not quite as interesting as 2011.
Despite the many surprises in 2011, only the tsunami that devastated parts of Japan had a real impact on the markets. It was more than psychological—the tsunami slowed manufacturing of electronics, cars and other manufacturing parts. Most everything else affected the sentiment, and we believe much of that sentiment is built into the current market prices.
While some members of our portfolio committee believe the unknowns this year may play a bigger role in influencing the market, the bottom line is that despite the possible affects of higher energy prices and the possible demise of the eurozone, we are sticking by our investment decisions. We are still invested for the long term, and we are still buying what we deem to be high quality companies that will survive any ups and downs the market might have. We are still buying McDonald’s Corporation (NYSE: MCD) and VF Corporation (NYSE: VFC).
Overall, we believe the market has the potential to be up 15% in 2012. We certainly believe we are due.
At Henssler Financial we believe you should Live Ready, which includes understanding how world events may affect the market. If you are unsure about how to develop your investment portfolio given the unknowns in the market, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or e-mail at experts@henssler.com.