2012 Annual Outlook

The world continues to ride the same train of global imbalances. While short-term solutions have allowed us to arrive at the next station, few are attempting to address the long-term issues. We believe that capital markets will continue to assail the weakest links in the financial system, which, hopefully, instills the required discipline for policymakers to make needed, but difficult, decisions. Unfortunately for long-term investors, this suggests that we will continue to encounter a series of market crises, leading to continued market volatility that can test investor resolve. During this period, it is important that investors are cognizant of the risks in their portfolios and remain alert for the opportunities created. While current markets continue to be driven by governmental policy rather than underlying fundamentals, we do see several powerful secular trends and risks that should shape the foundation of a portfolio for the long term.