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The trees are in bloom at Cedar Beach Park in Allentown, PA. |
THE FIRST QUARTER IN REVIEW
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Data as of 3/31/10
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1st Quarter
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1-Year
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3-Year
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5-Year
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10-Year
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Standard
& Poor's 500 (Domestic Stocks)
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4.9%
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46.6%
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-6.3%
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-0.2%
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-2.5%
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DJ
Global ex US (Foreign Stocks)
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1.6
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59.2
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-6.6
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3.8
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0.7
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10-year
Treasury Note (Yield Only)
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3.8
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2.7
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4.7
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4.5
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6.0
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Gold
(per ounce)
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1.0
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21.7
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19.0
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21.1
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15.0
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DJ-UBS
Commodity Index
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-5.1
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20.4
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-8.4
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-4.0
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3.0
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DJ
Equity All REIT TR Index
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9.9
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106.5
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-10.4
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4.0
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11.8
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Notes: S&P 500, DJ
Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends
(gold does not pay a dividend) and the three-, five-, and 10-year returns are
annualized; the DJ Equity All REIT TR Index does include reinvested dividends
and the three-, five-, and 10-year returns are annualized; and the 10-year
Treasury Note is simply the yield at the close of the day on each of the
historical time periods.
Sources: Yahoo! Finance,
Barron's, djindexes.com, London Bullion Market Association.
Past performance is no
guarantee of future results. Indices are
unmanaged and cannot be invested into directly.
N/A means not applicable or not available. |
STOCK MARKET RALLY CONTINUED
The stock market
followed 2009's powerful rally with a strong performance in the first quarter.
The S&P 500 rose 4.9%, excluding dividends, which was its best
first-quarter percentage gain since the heady days of 1998, according to
MarketWatch. Strong corporate earnings, solid corporate balance sheets, and
upbeat manufacturing data helped support the stock market's bullish results,
according to The Wall Street Journal.
It wasn't a
straight line up, though. Between late January and early February, the Dow
Jones Industrial Average dropped more than 7% as news of credit tightening in China, sovereign debt woes in Greece, and debates in Washington on healthcare and bank reform
helped scare investors, according to The
Wall Street Journal. The scare was brief as investors quickly "bought
the dip" and sent the averages higher by the end of the quarter.
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INTEREST RATES WERE STABLE
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The yield on the
10-year Treasury was essentially unchanged during the quarter as investors
continued to snap up all the debt the government offered, according to The Wall Street Journal. Demand for
corporate and high-yield bonds was robust which helped keep those rates at
relatively low levels.
Some investors
are concerned that our large budget deficits may result in a glut of bonds,
which could cause interest rates to rise substantially. That could put the
brakes on an economic recovery, but this worry has not come to fruition-yet.
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THE DOLLAR ROSE AGAINST THE EURO |
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The big story in
foreign currencies during the first quarter was the strength of the dollar
against the euro. According to The Wall
Street Journal, the dollar rose 6% against the euro as debt concerns in Greece, Portugal,
and Spain
weighed on the common currency. Investors are also evaluating the relative
strength of the U.S.
economy versus the euro countries and it appears that a consensus is building
that our country may grow faster. If that occurs, it may mean interest rates
could rise sooner in the U.S.,
which would also help support a strengthening dollar.
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DOUBLE DIP RECESSION LOOKING LESS LIKELY |
Recent economic
indicators suggest the economy is healing from the severe recession of 2008-2009.
For example, the Commerce Department said consumer spending rose in February
for the fifth consecutive month. Consumer spending makes up about 70% of gross
domestic product, according to Morningstar, so a rise in this number bodes well
for the economy. The manufacturing sector is looking robust, too, as the ISM
manufacturing diffusion index rose to 59.6% in March, which was its highest
level since July 2004, according to MarketWatch. Readings over 50% indicate that more firms
said business was improving than said it was worsening. It was also the eighth
straight monthly increase.
Just after the
quarter ended, the Labor Department released the March payroll report and it
showed a gain of 162,000 payroll jobs. It was the third gain in the past five
months and the largest increase since March 2007. This report, coupled with
other economic data, prompted Robert Hall, the head of the National Bureau of
Economic Research's Business Cycle Dating Committee, to say that it is
"pretty clear" that the deepest recession since the 1930s is over,
according to a Bloomberg report. Hall's organization is the
"official" source on declaring the beginning and ending of
recessions. Jeffrey Frankel, another member of the business cycle dating
committee, said, "The most likely date for the recession's end would be
midyear of 2009," according to the same Bloomberg report.
This mid-2009
date would seem to confirm the validity of the stock market rally that we've
experienced over the past year. The market started rising in March 2009--not
too far ahead of the time that Frankel suggested the recession ended.
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SUMMARY |
| The stock market
performed well in the first quarter as earnings growth continued to shine and
the economy continued to mend. Longer-term issues such as large government
deficits, housing weakness, and the withdrawal of stimulus money hang over the
markets like a black cloud, but so far, these concerns have not deterred
investors. |
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THINK ABOUT IT
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"Economic
progress, in capitalist society, means turmoil."
-- Joseph A.
Schumpeter | |
 
Mary L. Nothelfer, CFP® Emilio
J. Morrone, CPA, CFP®
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Securities offered through LPL
Financial, Member FINRA/SIPC.
*
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities
considered to be representative of the stock market in general.
*
The DJ Global ex US is an unmanaged group of non-U.S. securities designed to
reflect the performance of the global equity securities that have readily
available prices.
*
The 10-year Treasury Note represents debt owed by the United States Treasury to
the public. Since the U.S. Government is seen as a risk-free borrower,
investors use the 10-year Treasury Note as a benchmark for the long-term bond
market.
*
Gold represents the London
afternoon gold price fix as reported by the London Bullion Market Association.
*
The DJ Commodity Index is designed to be a highly liquid and diversified benchmark
for the commodity futures market. The Index is composed of futures contracts on
19 physical commodities and was launched on July 14, 1998.
*
The DJ Equity All REIT TR Index measures the total return performance of the
equity subcategory of the Real Estate Investment Trust (REIT) industry as
calculated by Dow Jones.
*
Yahoo! Finance is the source for any reference to the performance of an index
between two specific periods.
*
Opinions expressed are subject to change without notice and are not intended as
investment advice or to predict future performance.
*
Past performance does not guarantee future results.
*
You cannot invest directly in an index.
*
Consult your financial professional before making any investment decision.
*
This newsletter was prepared by PEAK.
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