• Bill Bullock

2013 First Quarter

The fourth quarter momentum certainly carried through to 2013's first quarter. To be honest, I am surprised we are "out of the gate" this quickly. After all, in early January I figured we would have the sequester to deal with as well as a vote on the debt ceiling limit in the first half of the year. The only volatility we really experienced was the positive kind which worked to our favor.


As I wrote in last quarter's report, there are many analysts and prognosticators that believe the stock market will average 7.5% before inflation while the bond market will average 2.5% on average over the next 10 years. The 10.61% S&P 500 return for the first three months has already surpassed the expected average return for the entire year. One local mutual fund manager I had dinner with a couple of weeks ago believes the S&P 500 could hit 17% by the end of the year. I have no idea where we will end up, which leads me to the "advice" part of my letter.


If you need cash for any short-term (less than one year) expenses such as tuition in the fall or a vacation you plan on taking in July, now is the time to sell that amount out of the market. Likewise, if you would like to become more conservative due to a significant change in your personal life, now may be a good time to rearrange your portfolio. I will be reviewing each of your portfolios and may rebalance depending upon your current vs. target allocation. However, I will not lower your equity allocation simply because of the perception that the stock market is too high. As we all know, it is extremely difficult to time these matters. I would like to stick to our goals that we have massaged through our meetings and conversations over the years. If you would like to make changes - specifically to become more conservative - now may be the time to make those moves. Do not hesitate to contact me.


As you will find with your Position Performance report, our bond returns are starting to look tired. The short-term bonds were up slightly while our intermediate bonds struggled a bit more. I don't expect the Federal Reserve to raise rates until the unemployment rate drops and judging from the last jobs number that was reported, it won't be any time soon. As we know, the Fed tends to have the short-end of fixed income while the intermediate and long-term bonds are subject to bond market supply and demand. I may make some changes in this area over the next six months; if anything, I will make sure you have a good balance between short and intermediate-length bond funds.

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