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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Year in Review

December 31st 2010 Year in Review

The major averages record double digit gains for the second year in a row, but 2010 wasn't without some volatility. The 2009 rally continued into 2010 topping out in April with the Dow hitting 11,200. Following the April highs, the averages dropped off a cliff as the economy slowed a bit. The European debt crisis reared its' ugly head and the BP oil spill was still polluting the Gulf of Mexico. To end the second quarter, the Dow went from an 8% gain to an 8% loss with the Dow Jones Industrial Average hovering just above 9500.

To start the third quarter the major averages looked pretty cheap , too cheap to ignore as we put it. We followed the lead of Barrons featuring a plethora of blue chip mostly Dow components trading for 10 times earnings and providing dividend yields of 2% to 3% or better. Our list of featured stocks included Exxon Mobil, Microsoft, Intel, Verizon, AT&T, Altria, Philip Morris, Merck, Chevron, IBM, HP, Oracle, Walmart, Johnson & Johnson, GE, and Cisco System. Only Cisco Systems produced a negative return although we recently featured that stock once again. The rest of the picks were stellar. Including Cisco, the 16 blue chip stocks recorded a 22% gain in the last six months not including dividends. Oracle rose nearly 50% from the start of the third quarter while Exxon, Verizon, Chevron, HP, and GE all rallied over 30%. I wish it was that easy all the time.

Most sectors performed great in the last six months including the white hot commodities. Sectors that have underperformed like the financials have perked up in the last month. Fund managers have been looking to put money to work in stocks that have not run up yet and remain compelling investments.

Looking forward to 2011, Wall Street forecasters are very bullish. Currently the S&P 500 is trading around 1258. However the major brokerage firms are looking for the S&P 500 to hit levels not seen in years. The high estimate of 1550 goes to Deutsche Bank which translates into a 23% return from current levels. Goldman Sachs is looking for the S&P 500 to hit 1450 which translates into a 15% return. The month of December has been spectacular in part to these bullish forecasts.

So hopefully 2011 will be another great year if not better, but plan on more volatility.