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US Stocks Eke Out Modest Gain of 0.3% in First Quarter
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Financial Markets Commentary
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April 3rd, 2015
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About HERON FINANCIAL GROUP, LLC
Heron Financial Group is a Registered Investment Advisor serving individuals and families across the United States, Europe, Asia and Latin America.
Our clients are corporate executives, managing partners of law firms and consultancies, Wall Street professionals, owners of businesses, and heads of families.
Our purpose is to clarify and simplify the means by which our clients will achieve their financial goals.
Client relationships range from $500,000 to $10 million in assets. |
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US stocks fell 3.6% in January, gained 6.0% in February, fell 1.9% in March for a net gain of 0.3% on the year. The dollar gained 9% YTD relative to the Euro, on top of last year's 13% rise, but stabilized in recent days. Crude oil bottomed around $46 in February, traded in a range of $45-55/barrel in recent weeks.
The jobs report on April 3rd surprised to the downside - adding only 126K jobs versus expectations of 244K. The US unemployment rate remained at 5.5%, the lowest level in 6 years, but annualized jobs growth of around 2 million/year barely keeps up with growth in the work force from demography and immigration. Labor participation rates are still quite low, which keeps down wages (good news for inflation) but also keeps down consumer spending (bad for business.)
We expected an increase in consumer spending given that the drop in gasoline prices adds $750/year to the average family budget. Consumers remain cautious given wages only grew 2.1% over the last year. Perhaps a sign of change - McDonalds and Walmart recently raised employee salaries by an average of $1/hour and introduced new benefits.
All eyes still on the Federal Reserve, which keeps hinting about higher rates, but has yet to take action. Gains in the dollar were driven by expectations of stronger economic growth and higher interest rates in the United States. Oil supplies are inflated worldwide as producers keep producing despite lowered demand. US corporate earnings are under pressure as the strong dollar hurts overseas sales, while US consumers rotate to cheaper imports. In world affairs, not much progress on many fronts - ISIS still fiercely defending gains in Iraq and Syria, Russia still saber rattling in the Ukraine, Iran still intransigent over nuclear arms negotiations, most of the Arab world still in turmoil, Greece and Germany still negotiating over debt resolution. In the United States, total gridlock in Congress not likely to ease until after the 2016 presidential election. So many important issues to address, yet politicians unable to form common ground within parties, let alone across party lines. All in, no surprise that stocks can't advance, especially after the 49% gains of the previous two years. The better news is that stocks haven't declined sharply either, though day by day volatility is higher this year than in recent years. For the time being, our clients will simply collect dividends and interest, while we wait for significant news to develop that would drive prices more emphatically in a new direction.
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As always, please call with questions and concerns.
Yours sincerely,
David Edwards
Heron Financial Group, LLC
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The HERON FINANCIAL GROUP Financial Markets Commentary is published following month end and whenever market conditions require comment. The views expressed in this letter represent HFG opinion and strategy as of the date published and can change at any time upon receipt of new information. Data quoted in this letter are from sources deemed reliable, but no guarantee of such data is implied. |
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