View from the Observation Deck

1. Investors favored defensive sectors, such as Utilities and Consumer Staples, in 2011. Dividend-paying stocks were popular with investors and defensive sectors tend to offer generous payouts relative to growth sectors.
2. Sluggish economic activity prior to Q4'11, the ongoing struggles at financial institutions and the uncertainty surrounding the debt crisis in the European Union helped make investors skittish. It was "risk-off" for most in 2011.
3. As the chart above indicates, the sectors that performed the poorest in 2011 are leading the market higher in 2012. Economic indicators, like January's 243,000 nonfarm payroll number, are boosting confidence levels, in our opinion.
4. Though nothing is official at this point, there has been some serious progress in finding a solution to the sovereign debt crisis in Greece. In 2011, equities often performed well when the news releases on this issue were optimistic in tone.
5. We provided the most recent earnings growth estimates for 2012. We believe that corporate earnings growth is the primary driver of stock prices over time.
6. The highest earnings growth rate estimate belongs to the S&P 500 Information Technology Index at 15.4%, while the lowest goes to the S&P 500 Utilities Index at -2.1%. The broader S&P 500 is at 8.8%.