As the year ended, financial markets, gripped by uncertainty over developments in Europe, struggled through a remarkably volatile twelve months for the equities market. While not seeking to downplay the anxiety generated by these events, particularly in relation to their effects on investment portfolios, it's worth looking back on how the year fared.

Though the market ended the year almost exactly where it started, it took some stomach-churning detours to get there. Despite a seemingly endless string of dramatic day-to-day price swings, the indexes wrapped up 2011 not too far from where they started. In fact, the S&P 500 Index finished up 2.11% from its 2010 finale. Using broad indices, diversified fixed income was the best performing asset class of the year, followed by government bonds.

International stocks fared worse and news seemed to underscore the general lack of progress this year on Europe's debt crisis. Along the way, the market absorbed a devastating nuclear disaster in Japan, the death of more than one foreign despot, and a historic U.S. debt downgrade.

As to what happens next, no one knows for sure, but that is the nature of risk. Quitting the equity market at a time like this is like running away from a sale. While prices have been discounted to reflect higher risk, that's another way of saying expected returns are higher.

Our philosophy at Elliott Cove rests on a solid foundation of core principles from the science of investing. While equity markets have had a rocky time in 2011, fixed income markets have flourished—making the overall losses to balanced fund investors a little more bearable and reinforcing our philosophy of prudent diversification.

Again, our message is consistent; stay focused, stay calm, and stay invested. If there has been any change to your personal finances, investment objectives, or if you would like to receive a copy of our Form ADV Part II or Privacy Policy Statement, please contact your Investment Advisor Representative or call us directly at (206) 267-2683.

Past performance is no guarantee of future results. This information is provided for educational purposes only and should not be considered investment advice or a solicitation to buy or sell securities. Investments offered through Elliott Cove Capital Management are NOT insured by the FDIC, are NOT deposits of any bank, and may include risk including the possible loss of principal.

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