During the past quarter, we are happy to report that the market recovery that started in March 2009 has continued. U.S. small stocks and real estate investment trusts had the best performance for the quarter, earning about 10% during the last 3 months. Large U.S. stocks and international small stocks earned about 5% during this time. Take some time to look at your asset class performance reports, which show the strong annual returns across every asset class, with real estate and emerging markets earning over 100%.
Over the last 12 months the stock market has had one of its biggest increases in history. Yet the average investor claims she has lost money on her portfolio, according to a national poll conducted by the Bloomberg News Service in March. The bull market has driven the Standard & Poor’s 500 Index up some 73 percent since the stock market low of March 9, 2009. Yet only three in 10 Americans polled by Bloomberg said their portfolios had risen in the past year.
Economists say this negative view is all perception: most investors, except those who made exceptionally bad choices, have seen their holdings go up since March 2009. Mark Zandi, chief economist for Moody’s Economy.com said Americans had recently been through “the proverbial economic wringer” and that it would take a long time to change perceptions. Even more important, Americans are not seeing the signs of economic improvement in their everyday lives that Wall Street is rallying on. With unemployment hovering near 10 percent, many Americans know one or more people who are out of work and that personal experience makes them feel negative about economic prospects.
The survey even found that so-called sophisticated investors, those with annual incomes above $100,000, said they had lost money in the last 12 months. “Economists look at their indicators and the American people see indicators in their everyday life,” said Ann Selzer, whose Des Moines, Iowa firm, Selzer & Co., conducted the survey. “It is hard to argue with what people observe in their own communities.”
This type of thinking may hurt the prospects of average investors, whose personal experience may cause them to hold back at just the wrong times. Wall Street rallies are based on prospects six months to a year away. Investors who wait to see signs of a recovery in their own lives and communities may miss out on the rally and instead start investing when stocks have already become expensive, rather than when they are cheap.
Now, in order to comply with the provisions of the Gramm-Leach-Bliley Act, I am enclosing a copy of SWM’s Privacy Statement for your review. The Privacy Act requires that I deliver this to every client on an annual basis. In addition, as a Registered Investment Advisor, Sparrow Wealth Management is required by the SEC to offer you a copy of Part II of Form ADV. If you would like a copy of Form ADV Part II, you may download it by going to the “Regulatory Compliance” page on SWM’s website (www.sparrowwealth.com). Please feel free to call me if you would like a copy mailed to you.
Sparrow Wealth Management has completed the process of transferring all former KFP clients to the new firm. We are happy to report that “not a soul was lost” in the transition to Sparrow Wealth Management. Thank you for your support and cooperation with this process. Also, SWM now has offices in New York City and Las Vegas, so feel free to tell your friends in these areas about our services. This is a great year to tell your friends about the strong recovery you have all seen in your portfolios during the last year. I doubt that very many investors have seen the level of increase that our clients have experienced as a result of higher international exposure and the rebalancing discipline we followed before and after the 2008 crash. Thank you for the new clients that have been referred to SWM so far in 2010. Your continued trust and confidence is greatly appreciated.
About Christopher Jones
Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.