It was only a year ago when our 2012 year-end target for the Dow Jones Industrial Average (DJIA) was reached during the first quarter and many wondered as to where the market would go from there.  The same occurred this year when the DJIA surpassed our 2013 year-end target of 13,800. Similar to last year, we are not making any adjustments to our 2013 target even though other well-known investment professionals are calling for 16,000+.  Our current view is that markets are overvalued relative to fundamentals but it is these same fundamentals that also form our perspective that downside risk is minimal based on current and following fiscal year earnings estimates.

One area we are tracking closely is earnings adjustment trends.  This is different from earnings growth as measured year over year.  We continue to observe negative trends in earnings adjustments for a majority of companies that we follow indicating economic uncertainty and its impact on earnings.  We are hoping for stability in these earnings adjustments over time and a major improvement in this area would actually be cause for changing our year-end target.  Excitement over beating lowered estimates can only last so long before markets start to realize how it is getting ahead of itself.

We recently decided to reduce our exposure to basic materials and energy by eliminating companies in industries such as coal and industrial metals.  As expected, the prices of natural gas, coal and iron ore have come off recent lows but, to our disappointment, did not have a positive impact on earnings.  Even though pricing has improved considerably for these commodities, it has been frustrating to realize that profitability remains a challenge for these companies.  The sustainability of higher price levels was also an issue given the global economic outlook.  Exposure to these companies did have a negative impact on client portfolios as we waited for the turnaround but moving forward we prefer to remain on the sidelines as we continue to monitor the cycle.

Large cap dividend yielding stocks that are driving the markets continue to appreciate due to demand for these companies and their dividends.  As we proceed through the year, we are evaluating as to where funds would go should a correction occur in this group.  Possible areas include a contrarian approach with out-of-favor stocks.  How about hard assets such as gold?  Or bonds?  Are these possible safe havens actually traps?  These questions will be addressed at our first Round Table Discussion (RTD) event.  Holding an interactive event will allow us to cover additional details concerning our outlook and address questions you may have.  If you haven’t contacted our office to reserve a seat at the event, please do so by e-mailing Leslie Tritschler at or call her at 484-320-6300.

As we celebrate our one year anniversary, we are extremely excited to announce the addition of four more colleagues to our organization.  They include Samuel Carpin, Amy Deptula, Nancy Stewart and Jennifer Garrett.  It’s truly amazing as to how we have grown over the past year and we recognize that it wouldn’t have been possible without the support of our clients and colleagues.  Please visit our website,, for more information on our newest team members.

Download Q1-13 Market Commentary

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