Compared to its foreign counterparts, the U.S. stock market is one of the best performers this year – even though some nervous investors may find that hard to believe.
The Standard & Poor’s 500 Index is basically flat so far this year, but that’s a far better performance than the double-digit losses in other markets.
The French and German stock markets are down about 18% and 21%, respectively. Japan has plummeted nearly 15% in the aftermath of the crippling earthquake and tsunami, and China’s Shanghai Composite Index has plunged about 17%.
“The U.S. is the best house in a bad neighborhood,” James Dailey, manager of the TEAM Asset Strategy Fund, told CNN. “A lot of it has to do with the policy decisions and politics around the world and that’s very discomforting.”
A major factor in weak market performance has been the Eurozone debt crisis. The lack of resolution has been rattling investor nerves for months, and will not go away in the New Year.
“The real structural problems facing Europe are going to require wholesale lifestyle changes that won’t get done in a year or two,” said Money Morning Capital Waves Strategist Shah Gilani. “European Central Bank meddling will only serve to extend the problem while they pretend things will sort themselves out.”
Another year of Europe’s problems plaguing economies has created a market environment filled with too much uncertainty for many investors to be comfortable.
“That’s led to a lot of paralysis,” said TEAM fund’s Dailey. “Investors are walking away from stocks and raising cash.”
A weak U.S. economic outlook for 2012 is also steering investors away from markets.
The Organization for Economic Cooperation and Development (OECD) estimates U.S. growth will slow to 2% next year, down from a 3.1% estimate in May. Of course, these forecasts are contingent upon Congress finding a way to stimulate the economy and tighten fiscal policy – not an easy balance to achieve. Without such action, U.S. economic growth next year could be as slim as 0.3%, and only hit 1.3% in 2013.
What investors need to know despite this dismal forecast is that the lack of growth does not mean a lack of profit opportunities. There are still investments that will boost your portfolio – if you know where to look.
“It is a less than favorable environment for the U.S. economy, but U.S. stocks should continue to outperform. Valuations are low,” Dan Morris, manager of the Manor Growth Fund, told CNN.
The last thing investors should do is let fear keep them out of stocks. The easiest way to miss profits is to park your cash on the sidelines, especially when there are investments that flourish in an unsteady environment.
The good news is, we’ve uncovered many of these winners in our Private Briefing service.
These recommendations include a promising biotech stock that’s up more than 45% since our recommendation, a global agricultural equipment maker up more than 33%, and an exchange-traded fund (ETF) that’s up more than 22% and ready to soar as its sector faces increasing global demand in 2012.
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With U.S. markets facing another uncertain year, click here to find out what the Private Briefing team of financial experts is recommending for your New Year investments.
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