US stocks are 23.8% higher than last year's low October 3, and 92.6% above the March 9, 2009 low. The Dow Jones Industrial averages and S&P 500 are at levels last seen May 2008, before the financial crisis began in earnest. The NASDAQ composite is at an 11 year high, up 121.0% from March 9, 2009. S&P 500 earnings, and earnings in general, are at a record level.

We point this out because we talked to so many prospective clients in recent years who categorically refused to invest in stocks "until all the problems went away." You know what? There are always "problems" or, as we refer to it, "History." If you watch cable news, and especially CNBC, you would live in a state of permanent paralysis. Luckily, the people who run General Electric and Intel and Genzyme and McDonald's don't watch the news. Every day, they come to work and ask, "What can we do today that will create value over the next 5 years." And those are the companies we invest in.

Strategy

Valuations remain favorable for stock investors, but after the rally of the last 5 months (about three years of "normal" returns) we would expect markets to trade sideways for a while. Our forecast is for gains of 12% in the S&P 500 in 2012, which was already up 9.0% YTD by February 29th. Our clients ask, "Should we jump out of the market for a while and come back in when prices are lower?" After factoring in trading costs, lost dividends, realized capital gains and potential opportunity costs if the market moves higher, we never find "trading" to be a winning strategy. Our stock holdings have a 5 year horizon; what happens quarter to quarter is not material.