This Year Versus Last

From Bespoke Investment Group

There have been numerous comparisons made between 2011 and 2012 since the start of this year.  In both years, the S&P 500 started off on a strong note before peaking and then selling off in the spring.  Looking at the chart below, however, shows that this year's market is trying to shake off a repeat of last year, and the timing for the divergence couldn't be better.

Last year at this time, the S&P 500 was in the midst of a three week 17% sell off brought on by slower economic data as well as the stalemate in Washington over raising the debt ceiling and then the subsequent ratings downgrade of US sovereign debt.  Like last year, the economy has been slowing and Washington still can't agree on anything, but for now at least, this year the S&P 500 has yet to run into the late summer swoon that has become all too common in recent years.  In fact, the S&P 500 is currently up more than 15% from where it was at this point last year.

My Comment:  While the two years share certain similarities {debt issues in Europe, slowing economy halfway through the year, fiscal policy issues here at home} there are differences.  For one US has economic growth albeit very tepid growth.  Another influence is the presidential election.  Another is that having spent over a year basically in a trading range stock prices became cheap.  They may be less cheap today but on a valuation basis, looking out over a 12-18 month horizon and based on what we know today, stocks still look attractive longer term.
Link:  Bespoke 2012 versus 2011
*Long ETFs related to the S&P 500 in client and personal accounts.