Market Commentary & Analysis

The S&P 500 finally broke through to a record nominal high, conveniently doing so (for market pundits at least) on the final day of the quarter. The widely-followed stock market barometer is now at its highest level since its previous peak in 2007. The first quarter was exceptionally strong for the index, which posted a 10.6% gain—one of the best quarters ever and the best first quarter since . . . 2012. So, we are coming off a great first quarter, just like last year, only this time we are bouncing around all-time highs.

According to a well-recited traders’ omen, "As January goes, so goes the year." The so-called January Barometer, as first mentioned by Yale Hirsch of the Stock Trader’s Almanac, suggests the performance of stocks in the first month of the year dictates where prices will head for the year overall. And January went quite well, with the S&P 500 starting 2013 up over 5%, its best gain for this seemingly powerful and predictive month in 15 years. Followers of this "fortune-telling" mechanism might be excited . . . but does it really work?

2012 might go down in the books as the "Year of the Fed," as the U.S. Federal Reserve and other central banks around the globe took unprecedented efforts to jump-start economic growth and soothe worried market participants. In the U.S., the Fed extended or launched multiple rounds of increasingly accommodative monetary programs, culminating with a fresh batch in December.

While the election is over, there is still plenty of uncertainty surrounding stock market direction for the remainder of the year. The fiscal cliff and its potential tax implications may be first and foremost on investors' minds, but China's slowdown and the perpetual problems in Europe have not gone away. Nevertheless, from an allocation standpoint, we believe that investors should hold tight and not shy away from the markets until there is a semblance of clarity.