2012 Performance Review: One Year, Five Year, and 10 Year Comparisons
The past year was one which exhibited very little in overall market volatility. In this environment the major stock market averages performed remarkably similarly. International, U. S. large, mid and small cap annual performance was in the range of 16 to 18 percent. The Stock Market Advantage (SMA) Portfolio underperformed the averages slightly due to a higher than normal concentration to the bond market; especially the short-term corporate sector (nearly 30% of assets). Short-term corporate bonds returned 5.3% — not a bad return in a low inflation environment, but a significant drag in a year when the major stock market averages were positive by over 15 percent.
There was only one signal generated by the Tactical Timing System last year (a sell on February 21, 2012). This shifted the allocation of the portfolio from a stock/bond mix of 45%/55% to 30%/70% when the S&P 500 was at 1,370. The S&P 500 ended the year at 1,426 so the timing signal was basically a wash.
The SMA Portfolio is currently positioned to take advantage of stock market weakness, which has been likely forestalled due to the era of “financial repression” engineered by the Fed. It can be debated whether the Fed is engaging in a prudent policy, but the economic recovery has been weak and subdued, so the Fed’s manipulations have not thrown things “out of whack” yet. This recovery could continue longer than normal because of its inherent weakness and stocks might grind higher in the coming year. As always, making any predictions regarding future economic and stock market performance is a dubious endeavor.
The SMA Portfolio held 17 positions throughout the year 2012. The best performer was Nautilus with a total return of 100% for the year. The weakest performance was turned in by the closed-end fund ASA Gold and Precious Metals Limited. See below for the performance of each of the holdings in 2012.
Last year was a stellar year for the SMA Portfolio as it outperformed the averages by a factor of nearly five [link].