The past year has not been kind to investors. Between problems in the housing market and rising oil and food costs, Many Americans are feeling as much economic pain as they have in the past 20 years. And for the foreseeable future, the economic and stock market pictures don’t appear to get any better.

Below is a chart showing how major indices have done since a year ago. The black line is the Nasdaq. You can see that it is off about 7% since last summer. The Dow Jones Industrials (gold line) have declined by 12%. Weakest of the three is the S&P 500, which is down about 13% over the past 12 months.

This chart also shows that right now there is no discernable trend among these major indices. That makes it very difficult to anticipate where the next move will come and how assets need to be allocated.

Complicating things for investors right now is that there are also no long-term, low volatility trends among the sector categories. Traditional defensive positions like government bonds, health care, and utilities are generally in the same kind of sideways funk as everything else.

The good news is that these types of situations are unusual and normally don’t last for an extended period. While we would all like to be invested in something that is going up, for now the best course of action is to remain on the sidelines until we can clearly see some sector and market leadership.
F.S.

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