These are the personal views of Sharon Snow, chief executive officer of Metropolitan Capital Strategies, an SEC-registered investment adviser in Manassas, Va.:
Metropolitan Capital Strategies believes there will be a positive market in 2011 primarily due to the increase in earnings of the S&P 500. Some experts are expecting operating earnings at $96/share for 2011 (Citigroup Global Markets, “US Portfolio Strategist,” Jan. 6) compared with $85 in 2010 and $62 in 2009.
This increase in earnings is a result of cuts in employees, brick-and-mortar stores and other expenses for the companies that make up the index, but regardless, revenue and earnings are two of the top fundamentals for a bounce in the equity markets.
The market will recover due to the increase in earnings and revenue, though revenue of individual companies may still be off a lower number. Some uncertainty has been cleared up for the time being, including the midterm elections and change in power, the continuation of quantitative easing with QE2 and talk of QE3, the federal government’s continuation of permanent open market operations and no change in the mark-to-market rules for the banks. This expansionary policy should assist the U.S. recovery.
The underlying “true” U.S. economy may remain weak, with the GDP projections for 2011 of 2.5%. U.S. employment and underemployment will remain weak but the stock market is forecasted to increase, with experts predicting between 1325 and 1400 for an end of the year number on the S&P 500.
Every investor should have a strategy that employs two things: the ability to make money or generate alpha, and the ability to keep that money or protect those profits once they are realized. Most investment strategies only focus on the making money side. A good New Year’s resolution for all investors would be to incorporate both into their strategy.
Looking ahead, Metropolitan Capital Strategies believes opportunities for double-digit returns with the corresponding high confidence will be found in 2011 in the broad-based U.S. stock market as well as in several sector ETFs. It could also occur in the global emerging market and some select countries. In the next five years, we could also see opportunities in commodities, bond ETFs, possibly inverse ETFs and the currency market.
An investor should always employ capital appreciation and loss avoidance or risk management in his or her portfolio.
Every asset class has risk at some point in time, even money markets and Treasurys, which are both assumed to be low risk but have lost money. It is important to keep a balance of short- and long-term goals for your money and use patience and discipline.
All market cycles go up and down, and investors should prepare for and expect that.