2011: The “Interesting” Year

For the week of Monday, December 26, 2011 through Friday, December 30, 2011

• Standard & Poor’s 500 Index: -0.61%
• Dow Jones Industrial Average: -0.62%
• NASDAQ Composite: -0.52%

2011 has been an interesting year. From the Arab Spring, the earthquake and tsunami in Japan, to flooding in Thailand, and a Debt Crisis in Europe, the markets have faced an uphill battle this year. U.S. Treasurys were also downgraded by the rating agencies from AAA to AA+. Interest rates remain just above all-time lows. Consumer confidence is finally on the rise, unemployment numbers have recently taken a turn for the better, but U.S. housing prices have continued to fall.

Many sectors fared well this year: utilities, healthcare and consumer staples finished the year strong for defensive stocks. Financials stocks performed very poorly because of mountains of new regulations. As a surprise, high quality value stocks fell roughly 6% this year.

Next week kicks off the primary race for the U.S. presidential election. For 2012, we expect interest rates to rise and economic conditions to improve.

Economic Data

• Conference Board Consumer Confidence
  • Consumer confidence rose from 55.2 to 64.5 according to the Conference Board;
    • The expectations component of the index rose from 66.4 to 76.4, pushing the number higher, and
    • The present situation component also rose to 46.7 from 38.3.
  • This is the highest reading since April of this year, and
  • The increase is much more than expected.
• Case-Shiller Home Price Index
  • Home prices continue to fall, however there are some good signs in the housing market.
  • Prices recovered slightly for the three-month period ending in October compared to September.
  • For the period ending in October, the 10-city composite is 3% lower than last year.
    • Last month’s price drop was 3.3%
  • The 20-city composite is 3.4% lower over the same period.
    • Last month’s drop was 3.6%.
  • On a yearly measure, Las Vegas and Atlanta were hammered with new lows since the peak.
  • Atlanta homes prices fell 12% compared with last year.

Interest Rates

• Rates fell significantly during 2011.
• This past week, the two-year Treasury inched up one basis point to 0.29%.
• The five-year Treasury dropped three basis points to 0.95%, still below 1% and ending the year down almost 1%.
• The 10-year Treasury fell three and a half basis points to 1.99%, finishing the year down 1.5% from January 2011’s level around 3.5%.
• The 30-year Treasury slipped five basis points to 3.01%; down from 4.5% at the start of the year.

Company News

• General Electric Company (NYSE: GE)
  • The finance division of GE has agreed to purchase the U.S.  retail deposit operations of insurer MetLife.
  • The deal benefits both companies:
    • MetLife will no longer be subject to new federal regulations for financial institutions.
    • MetLife will have the flexibility to raise dividends and repurchase shares when it exits the banking business.
    • GE purchased the deposits at a discount and will be able to reduce its reliance on volatile financial markets for future funding.
  • GE’s lending division is now larger than all but seven U.S. banks.
• Sears Holding Company (NASDAQ: SRHD)
  • Sears is struggling and Eddie Lampert may have to go back to the drawing board to save the company.
  • Following the Christmas holiday, Sears Holdings announced that it will close between 100 and 120 U.S. stores.
  • For the eight weeks ending on Christmas Day—which is the most important sales period for retail—same-store-sales fell 5.2%,
  • Shares fell 27% on Tuesday and have lost more than half their value in 2011.
    • Since 2005, shares have fallen roughly 73%.

Discloures

This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.