Charles Schwab
CHARLES SCHWAB on the US Market
From an overall market perspective, the year 2012 has been quite something. We have seen the market focus on the European debt crisis to the US Presidential election, the current focus on the fiscal cliff; and markets have traded on the ups and downs of news regarding each situation. However, an important lesson to take from this past year is that the market, and the broader economy, especially in the United States, have exhibited remarkable resiliency. For the future, there is potential for pullbacks, but we believe the long-term success of equities will beat inflation over time.
From an employment standpoint, jobs will likely continue to be in focus. The outcome of the current Washington negotiations could impact the direction we're headed in the near future, however, improved auto sales and positive retail sales numbers reported by the National Association of Retailers do show us that consumer demand is steady. With plenty of cash on companies' balance sheets, we believe that hiring could accelerate moving into next year if some certainty is provided to businesses through a credible tax policy, spending cuts, and deficit reduction plans. In addition to employment, housing now appears to be in recovery mode and we believe there remains ample demand for housing growth; which could also offset some of the impact from tightening on the fiscal side.
The Fed continues to foster economic growth, and it seems unlikely to change that stance in the near future. Most recently, the Fed replaced the expiring "Operation Twist" with additional purchases of long-term Treasury securities in the amount of $45 billion per month to start 2013. That will be in addition to the $40 billion of mortgage-backed securities (MBS) they are buying through QE3.
Overall, we do not believe in market target-setting. As each year brings many unforeseen events that can impact the economy and the market over the course of a twelve- month period, we don’t believe that it serves investors well. Who could have predicted the way the European situation played out, or the impact of Hurricane Sandy in the northeast, or how Middle East tensions would develop, or even how
the current fiscal cliff negotiations come to conclusion?
There is no doubt that the United States, regardless of the
outcome of the current fiscal cliff negotiations, will undergo some form of fiscal
tightening in 2013.
There is no doubt that the United States, regardless of the outcome of the current fiscal cliff negotiations, will undergo some form of fiscal tightening in 2013. The net is that there will be at least some drag on economic
growth.
However, there are always many factors influencing economies and markets that can serve as fiscal tightening offsets; and psychology always plays an important role. For
example, while negative initially, the impact of Hurricane Sandy to start 2013 could help to offset some of the fiscal drag as the rebuilding kicks into high gear. Depending on how the cliff is resolved, or not, businesses with more certainty could begin to invest in delayed projects, which could also be a boost to the economy.
In sum, looking back at the past year in order to learn and better prepare for the future can be a valuable
exercise. However, when you take a broad look at what the US economy, and the world as a whole, has experienced, it’s apparent that numerous phases that were at least as challenging historically. There is one thing that all crises have in common: they do eventually come to an end. Here’s to a happy and successful 2013 for us all.
Kully Samra,
UK Branch Director, Charles Schwab
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126