Last Friday, the Dow Industrial Average closed at 14,000 for the first time since October 2007. Pleased as most of us are to see this milestone reached again, it is probable that a “pause” may soon take place.

The 4^th quarter earnings report season “sweet spot” is behind us as is the lift it sometimes provides. Inflows to U.S. stock mutual funds were positive in January 2013 for the first month in almost two years, but this is usually a “contrarian” indicator. This means that people tend to buy high, not low and the market may take a rest near these levels. Are we concerned the Bull Market in equities is over? No, we are not. S&P 500 corporate earnings multiples (P/E ratios) are still at very low historical levels. LPL Research believes if there are market dips in the next few months, they will probably be attractive buying opportunities for investors who have been underinvested in stocks in recent years. Remember, vast numbers of investors sold equities during the recent market decline (2008 and 2009) and there are trillions of dollars earning basically zero interest sitting on the sidelines. This will be the fuel for the continued Bull Market to come. Last week provided interesting economic data. We learned that economic growth occurred fast enough to create jobs and move the widely watched ISM index, at 53.1 to a 9 month high, but not fast enough to cause the Federal Reserve (Fed) to think about ending its program of bond purchases (quantitative easing or QE3) anytime soon. Most surprising was the -0.1% drop in GDP between the third and fourth quarters of 2012. Economists were expecting a 1% rise. Within that surprisingly weak report was a stunning 22% drop in defense spending, the largest quarter over quarter drop in defense spending since 1972, as the Vietnam War was winding down. This drop alone shaved 1.3% from GDP. If not for this drop and the effect from Superstorm Sandy, GDP growth would have been closer to 3% than to zero. So, the message is good, but still a little mixed and the defense spending story needs more time to play out. In the last 20 years, the S&P 500 has returned a 7.8% average annual return. The average investor return for the same period of time has been less than 3%. I am hopeful that these newsletters I have written along with our meetings and conversations has helped you to resist the tendencies of the “flock” and that you are now enjoying the recovery in your portfolios that so many have missed. LPL will have completed the bulk of the tax information distribution by February 15^th. If you have any questions, do not hesitate to contact us.  –  Mark   The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice.  WE suggest that you discuss your specific tax issues with a qualified tax advisor. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  “Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is an unmanaged index and cannot be invested into directly.  Past performance is no guarantee of future results.”  References:   LPL Financial Weekly Economic and Weekly Market Commentary dated February 4, 2013 and Don Hays Financial Commentary.