2012 Year-End Screens Review: Investors Caught in Political Cliffhanger
Politics played a key role in the markets this year. First, there was the presidential campaign and election. Then, political gridlock reigned on Capitol Hill, as the country faced a possible year-end fiscal cliff of expiring tax cuts and automatic budget cuts.
By the time you read this article, we will know whether Congress and the president were able to come to an agreement regarding taxes and spending cuts or if the Budget Control Act of 2011 will go into full effect. If the latter happens, taxes will go up for many Americans, while massive spending cuts in the federal budget will be automatically triggered by Congress’ sequestration rules. Serving as a backdrop to the political drama at home is a global economy that is still in the fragile stages of a recovery.
In this article
- The Rankings
- Impact of Dividends
- Top Performer of 2012
- Number of Holdings and Turnover
- Measuring Volatility
- What It Takes: The Investment Characteristics of the 2012 Winners
- Risk-Adjusted Returns
- Calculating Risk-Adjusted Return
- Behind the Scenes of the Top 2012 Strategy
- The AAII Stock Screens
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If you didn’t know any better, you may think that this gloom and doom would have wreaked havoc on the markets and portfolios alike. However, the markets roared out of the gates to start the year, as the S&P 500 index gained almost 13% through April 2, 2012. The index subsequently gave up nearly 10% before finding a bottom on June 1, 2012, and rebounded 14.7% by September 14, 2012. The end of summer and the final stretch of the presidential campaign saw the S&P 500 lose nearly 8%. But once the dust settled and the market digested the election results, the index gained a modest 4.8% between November 15 and December 7, 2012. Year-to-date, through December 7, 2012, the S&P 500 is up 12.8% on a simple price-change basis, excluding dividends. For an election year, investors should be more than pleased with these results. According to Ned David Research Inc., the S&P 500 has averaged a 7.5% gain during an election year since 1900.
Overall, the AAII stock screens have fared reasonably well. Of the 64 we currently track at AAII.com, only 11 are currently down for the year. Conversely, 26 have outperformed the S&P 500 year-to-date. The median, or midpoint, price increase for all the screens is 10.0%. None of the screens is having a ‘best’ or ‘worst’ year since we started testing these strategies in 1998.
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