game plan: noun
- A carefully thought out strategy for achieving an objective.
The voting is over. The ballots have been counted. Barack Obama has another term as president. Half the population is celebrating and half the population is a bit more fearful. In the US stock markets the initial reaction has been to sell. As long term investors we knew the outcome of the presidential election was only one of many worries ahead of us. Now that we know who will occupy the Oval Office and the halls of Congress, the media can turn its attention to analyzing the “fiscal cliff” and its potential effect on our economy. In anticipation of these year-end 2012 events, we have spent the last two years shifting and concentrating our equity portfolios toward large capitalization companies. As a result, we currently have very little allocation to small capitalization stocks and we have no exposure to emerging market funds. During this same time period, we communicated our belief that short term market moves are typically a function of greed and fear motivated by economic events. These market moves lead to occasions to sell or buy. The proper scrutiny of these emotional moves is what creates the opportunity in our strategy. We have always been focused on the long term growth of client portfolios. Should there emerge some impetus in the markets; be it election results, uncertainty related to the fiscal cliff, European challenges, or any other event that leads to fear and uncertainty, we will approach it as a potential opportunity to re-establish positions in smaller companies and emerging markets at lower prices. We’re confident that, in time, fiscal cliff uncertainty will fade away and growth will continue in the global economy regardless of which party is in the White House or Congress.
In summary, one of our managers, Michael Shaoul, of the MainStay Marketfield fund wrote this today about the fiscal cliff:
Our expectation remains for some sort of a fiscal compromise to be crafted closer to the deadline data, albeit one which will contain obvious flaws, fudges and inequality. In the meantime (and perhaps post-compromise) the Fiscal Cliff will now become the primary reason used to avoid participating in the current bull market, and for a period of time it certainly has the potential to generate some unpleasant price movement, playing much the same role that the Eurocrisis did in 2011 and the first half of 2012.
Please contact your SYM advisor if you have any questions at all.