After 18 months and over $2 billion dollars spent, the Presidential and Congressional races are over and we find ourselves mostly where we were politically after the mid-term elections. A Democratic Senate and White House and a Republican House. The fear with so many issues that need quick resolution is that more gridlock will rule the day and the US will head over the fiscal cliff in a little less than 2 months from now. Washington has much work to do. Let's hope that politicians of both stripes will get to the work of governing and leading and that solutions to these monumental issues can be settled in a bi-partisan and effective way.
The markets fell sharply yesterday for the greatest one day loss for the year. While there are a number of theories on what happened, the likely result is the combination of several reasons. It appears that Wall Street was expecting a Romney win and was surprised that President Obama was able to hold onto the White House. Additionally, Mario Draghi of the European Central Bank threw additional cold water on the markets with comments indicating that Germany is beginning to be severely hampered with the problems of the rest of the European Union. Germany has been the stalwart in Europe and if their economy stumbles it could accelerate the further demise of the rest of Europe. It is a tenuous situation at best. The result was a 2.5% loss for most all of the major indices. The Russell 2000, Nasdaq 100, and Dow all fell through the all-important 200 day moving average that often separates bull and bear markets. Fortunately, the S&P 500 fell just short of this demarcation line but is precariously perched just above the line. The bulls will need to make a stand here if there is hope that the markets can rally into year-end. The Dow and S&P also fell below important psychological levels as 13,000 and 1,400 were both lost in yesterday's decline. 1375 is the number to watch on the S&P as that is the last support level before a large gap in support. If 1375 is breached, it would bode much steeper losses over the near term. We'll have much more to say in our next newsletter.
Despite the heavy losses yesterday, our portfolios held up extremely well. Our conservative portfolios were mostly unchanged with a loss less than one tenth of one percent and our moderate and aggressive strategies fell a little less than four tenths of one percent. However, if the selling resumes, our portfolios will slowly deteriorate and we will need to make some adjustments. The market is due for a bounce so we will be watching closely to determine if the selling is over or just getting started. All hands are on deck.
