January 4, 2010

Money Flows in 2010: Searching for Alpha, January 2010

There are a lot of nervous investors around as we begin a New Year and decade. I view this as a positive, since the cash that is sitting on the sidelines will serve as fuel to propel asset prices higher as folks slowly acquiesce to higher prices.

This year isn't likely to proceed as 2009 did, however. Credit-related investments aren't likely to repeat their stellar run. The top dogs in my book are dividend-paying stocks of global firms, based both here in the U.S. and elsewhere. Economic growth won't be uniform, but expect worldwide economic activity to move forward, led by commodity producers such as Australia and Canada, and the emerging markets.

Japan is my dark horse choice for 2010. Some 65% of Nikkei stocks are trading under book value, and the companies that have meaningful global footprints should do well. Those Japanese firms that rely on domestic growth will likely suffer from malaise, much as they did in 2009.

The Monthly Index Report for December 2009

Index

Dec-09

QTD

YTD

Description
S&P 500 Index*

1.8%

5.5%

23.5%

Large-cap stocks
DJIA*

0.8%

7.4%

18.8%

Large-cap stocks
Nasdaq Comp.*

5.8%

6.9%

43.9%

Large-cap tech stocks
Russell 1000 Growth

3.1%

7.9%

37.2%

Large-cap growth stocks
Russell 1000 Value

1.8%

4.2%

19.7%

Large-cap value stocks
Russell 2000 Growth

8.6%

4.1%

34.5%

Small-cap growth stocks
Russell 2000 Value

7.6%

3.6%

20.6%

Small-cap value stocks
EAFE

1.5%

2.2%

32.5%

Europe, Australasia & Far East Index
Lehman Aggregate

-1.6%

0.2%

5.9%

U.S. Government Bonds
Lehman High Yield

3.3%

6.2%

58.2%

High Yield Corporate Bonds
Calyon Financial Barclay Index**

-3.0%

-1.8%

-4.4%

Managed Futures
3-mo. Treasury Bill***

0.0%

0.0%

0.3%

All returns are estimates as of December 31, 2009. *Return numbers do not include dividends.

** Returns are estimates as of December 30, 2009.

Ben Warwick is CIO of Memphis-based Sovereign Wealth Management. He can be reached at ben@searchingforalpha.com.

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