On Demand

Will History Repeat Itself in 2013?

Global equity markets finished 2012 with a bang, and the S&P 500 ending the year up 13.4%. But what you might have forgotten is that virtually all of those gains came in the first quarter. The S&P 500 rose 12.0% in the first three months of last year and only managed to squeak out another 1.4% in the nine months that followed.

Why do I bring this up? Simple. I don't want you to see the 2013 monster opening-day rally and draw the wrong conclusions.

I Say This As a Market Bull

Overall, I do expect 2013 to be another profitable year. But I also expect it to be another year marked by political drama--both in Washington and in the Eurozone--and the market volatility that comes with it.

Remember, this Fiscal Cliff deal solved nothing. It merely postponed a bigger debate about the debt ceiling by two months. And both of these are minor compared to the real fiscal crisis coming, which is the retirement of the Baby Boomers and the stresses this will put on Social Security and Medicare.

On the other side of the Atlantic, the threat of a Eurozone collapse has receded, at least for now. But Europe's stabilization has rested largely on two Italian men named Mario--ECB president Mario Draghi and soon-to-be ex-prime minister Mario Monti.

I'm not too worried about Mr. Draghi; after dithering for months, he has finally managed to instill some confidence in the euro. But frankly, I'm terrified of what might come after Mr. Monti leaves office. Monti was the first adult to lead Italy since World War II, and he has almost singlehandedly calmed the bond markets into financing Italy's gargantuan debts at a reasonable rate. But what happens when he leaves...and the infantile political theatrics start up again?

I guess we'll have to see.

The Trade

In recent weeks, I've recommended that investors buy income-producing master limited partnerships and dividend-paying (and raising) stocks. Today, I'd like to tell you how to incorporate these into a larger trading strategy for 2013.

In a choppy, sideways market, there are two ways to make money. You can actively trade, buying low and selling high, or you can get paid via a consistent dividend stream. I recommend a combination of the two.

In a moderately aggressive portfolio, put roughly 60% into "core" holdings that you are content to hold on to through any volatile rough patches. This is where I would place $VIG and $AMJ, the two ETFs I recommended in late 2012. It would also be a good place for REITs and other income-oriented plays.

With the remaining 40% of your portfolio, trade to your heart's content. Go long, go to cash, or even go short. This is where I would place more speculative bets, such as emerging markets or stocks that you are trading as momentum plays.

Read more trading ideas in our daily Markets section.


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About the Author


Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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