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‘Judging the Judges’ and Your Takeaways for 2013

Posted By Kent Thune On December 3, 2013 @ 1:15 pm In Markets | Comments Disabled

“It’s important to choose not who you think is the prettiest girl, but who the judges think is the prettiest girl.” ~ John Maynard Keynes

When I look back on 2013, the primary capital markets theme that comes to my mind is the “don’t fight the Fed” investing mantra. But with this already at the fore of investors’ minds at the beginning of the year, what with QE 3 and the anticipation for the “great rotation” in place late 2012, the actual underlying theme for 2013 was more of a guessing game about what the Fed would do or say next.

Therefore the key investing skill for 2013, if not any given calendar year, was not to judge the economy and capital markets accurately but to judge the judges accurately, even if you did not agree with their judgment. For example, if you guessed there would be no QE tapering this year, and invested accordingly, you would have likely over-weighted your stock allocation and participated in what may end up being the best year for stocks in 15 years.

And under-weighting bonds was a prominent idea in 2013 but the “flight to equities” didn’t exactly translate into a horrific exit from all fixed income securities. Who puts all of their fixed income eggs into one basket of high credit quality domestic bonds? And why must the financial media talking heads use the 10-year US Treasury Bond as its benchmark? A well-managed multi-sector bond fund, such as Dan Fuss’ Loomis Sayles Bond (LSBRX), is up more than 4.50% as of this writing and covers a wide range of the bond universe from investment grade bonds to high-yield to foreign bonds. That’s what I call total bond market.

What Are Your Key Takeaways From 2013?

The Fed’s calls were but one general market theme of 2013. Before sharing your 2013 takeaways, here are a few more of mine (or perhaps I should call them data points that are somewhat interesting or worthy of reflection before going into the New Year):

  • Ugly but predictable Government crises
  • Gold hit with massive correction
  • No 10%-plus correction for stocks in over two years
  • 2013 trending to be best year for stocks since 1997*
  • First year since 2006 equity funds have seen net inflows*

But these are some of the more obvious data points making year-end headlines now. I would like to know what critical points or interesting themes—small, large, good, bad, or ugly—you will take away from 2013 and carry with you into the next year.

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Kent Thune is the blog author of The Financial Philosopher [1]. You can follow Kent on Twitter @ThinkersQuill [2].

 

*Source: Bloomberg, Stocks Triumph for a Third Month While Bullion Tumbles [3]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2013/12/judging-the-judges-and-your-takeaways-for-2013/

URLs in this post:

[1] The Financial Philosopher: http://www.thefinancialphilosopher.com/

[2] @ThinkersQuill: https://twitter.com/ThinkersQuill

[3] Stocks Triumph for a Third Month While Bullion Tumbles: http://www.bloomberg.com/news/2013-12-01/stocks-triumph-third-month-in-best-run-since-2009-as-gold-sinks.html

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