MONTHLY QUOTE
“The
state of your life is nothing more than a reflection of your
state of mind.” –
Wayne Dyer
MONTHLY TIP
If
you have a son or daughter graduating from college this spring,
remind them to try and build an emergency fund. Those with the
least seniority can be the first to be laid off in the workplace,
and sometimes that first job after college doesn’t work out.
MONTHLY
RIDDLE
You
use it between your head and your toes; the more it works, the
thinner it grows. What is it?
Last month’s riddle:
1987,
1993, 1997, 1999 … these are not only years on the calendar,
but also prime numbers. After 1999, what was the next year that
was also a prime number?
Last month’s answer: 2003.
THE
MONTH IN BRIEF
Would you believe the Dow Jones Industrial Average managed to eke out a gain in March? It rose 0.76% on the month, even as a plethora of troubling headlines rocked the world and Wall Street. At home, the unemployment rate was descending and consumers increased their spending (though mainly in response to higher energy and food costs), and the service and manufacturing sectors kept growing. The newest real estate reports showed home sales and home prices headed south. Oil went above $100 a barrel, gold prices increased and silver prices matched 30-year peaks.1
Would you believe the Dow Jones Industrial Average managed to eke out a gain in March? It rose 0.76% on the month, even as a plethora of troubling headlines rocked the world and Wall Street. At home, the unemployment rate was descending and consumers increased their spending (though mainly in response to higher energy and food costs), and the service and manufacturing sectors kept growing. The newest real estate reports showed home sales and home prices headed south. Oil went above $100 a barrel, gold prices increased and silver prices matched 30-year peaks.1
DOMESTIC
ECONOMIC HEALTH
The unemployment rate fell to 8.8% in March – a full percentage point below where it had been in November. The jobless rate hadn’t been so low since April 2009. According to the Commerce Department, personal spending rose 0.7% for February – but there was an asterisk. Prices rose 0.4% last month as measured by the PCE index, so the inflation-adjusted gain in consumer spending was 0.3%. Speaking of inflation, it was definitely back: the Labor Department let us know that the Consumer Price Index rose 0.5% in February while the Producer Price Index climbed 1.6%. If it was any comfort, both core PPI and core CPI were up just 0.2% for February.2,3,4,5
The unemployment rate fell to 8.8% in March – a full percentage point below where it had been in November. The jobless rate hadn’t been so low since April 2009. According to the Commerce Department, personal spending rose 0.7% for February – but there was an asterisk. Prices rose 0.4% last month as measured by the PCE index, so the inflation-adjusted gain in consumer spending was 0.3%. Speaking of inflation, it was definitely back: the Labor Department let us know that the Consumer Price Index rose 0.5% in February while the Producer Price Index climbed 1.6%. If it was any comfort, both core PPI and core CPI were up just 0.2% for February.2,3,4,5
With
gas prices so high and headlines so gloomy, it is not surprising
that the University of Michigan’s final March consumer
sentiment survey came in at 67.5, the poorest reading since
November 2009; the Conference Board’s consumer confidence index
fell to 63.4 in March from 72.0 in February.6,7
The
Census Bureau said retail sales increased by 1.0% in February –
and sales were up 8.9% year-over-year. On the downside, durable
goods orders unexpectedly fell by 0.9% in February (0.6% minus
transportation orders).8,9
The
closely watched Institute for Supply Management manufacturing
index showed a bit of moderation in the growth of the sector,
registering a 0.2% decline in March to 61.2. Still, the index has
shown the sector expanding for 20 months. March ended with the
February edition of ISM’s service sector index at 59.7 (and
showing 15 straight months of growth).10,11
GLOBAL
ECONOMIC HEALTH
The unprecedented combination of tragedies in Japan, the unsettled political tension in Libya, Yemen and other Middle Eastern nations – what impact would this have on electronics supplies, auto supplies and oil supplies? The uncertainty left investors worldwide uneasy.
The unprecedented combination of tragedies in Japan, the unsettled political tension in Libya, Yemen and other Middle Eastern nations – what impact would this have on electronics supplies, auto supplies and oil supplies? The uncertainty left investors worldwide uneasy.
Japan’s
economy minister Kaoru Yosano felt that the disasters affecting
his nation would reduce Japan’s 2011 GDP by 2-3%. As Japan now
accounts for 9% of global growth rather than the 20% of world GDP
that it did in 1995, some economists stateside felt the reduction
in global GDP would amount to circa 0.3%, perhaps just 0.1% for
America.12,13,14
Wall
Street was also watching how other Asian nations reacted to the
region’s new price and supply chain pressures. Inflation was a
concern: South Korea’s annualized inflation rate hit 4.7% in
March (the highest reading in 29 months) and annualized inflation
in China reached 4.9%. China’s central bank has raised interest
rates three times in the last five months; India, Taiwan and the
Philippines also raised benchmark interest rates after the
earthquake in Japan.15
In
Europe, Portugal was the latest nation pushed to the brink of
bailout by debt: it joined Greece and Ireland in receiving credit
downgrades from leading agencies, with years of austerity ahead
for all three nations. (Eurozone economists hoped Spain wouldn’t
join the list.) Ireland decided to pump €24 billion into its
banking system last month, even after its 2010 EU/IMF bailout.
Some analysts feel that it could take as long as a generation for
Ireland, Greece and Portugal to resolve their debt crises.16
WORLD
MARKETS
Markets in Asia generally fared better than their European counterparts last month. For example, Hong Kong’s Hang Seng and China’s Shanghai Composite both advanced 0.8% - and India’s Sensex soared 9.1%. In Japan, the Nikkei 225 fell 8.2% (and considering the events of March, that retreat certainly could have been worse). In England, the FTSE slipped 1.4% for the month, but that was mild compared to the 3.0% dip for the CAC 40, the 3.2% loss for the DAX and the 3.7% decline for the Dow Jones STOXX 600. Other indices barely moved during a volatile month: Canada’s TSX Composite retreated 0.1%, while Australia’s All Ordinaries advanced 0.1%.17,18
Markets in Asia generally fared better than their European counterparts last month. For example, Hong Kong’s Hang Seng and China’s Shanghai Composite both advanced 0.8% - and India’s Sensex soared 9.1%. In Japan, the Nikkei 225 fell 8.2% (and considering the events of March, that retreat certainly could have been worse). In England, the FTSE slipped 1.4% for the month, but that was mild compared to the 3.0% dip for the CAC 40, the 3.2% loss for the DAX and the 3.7% decline for the Dow Jones STOXX 600. Other indices barely moved during a volatile month: Canada’s TSX Composite retreated 0.1%, while Australia’s All Ordinaries advanced 0.1%.17,18
How
about the MSCI World and MSCI Emerging Markets indices? In U.S.
dollar terms, the Emerging Markets index (+5.70%) outperformed
the World (-1.24%) last month. For the quarter, things were
different: the World (+4.29%) notably outperformed the Emerging
Markets (+1.69%).19
COMMODITIES
MARKETS
Gold prices rose 2.1% in March, which helped the precious metal go +1.3% for 1Q 2011. On March 31, gold settled at $1,438.90 per ounce on the COMEX. As the month wrapped up, the 1Q performance of key precious metals was all over the map: +22.5% for silver (which hit peaks unseen since 1980), +0.3% for platinum, -4.4% for palladium. March was a banner month for oil, of course: NYMEX crude advanced 10.1% for the month to $106.72 per barrel at the close on March 31. Oil hasn’t has such a hot month since September, and the March advance brought the commodity’s 1Q gain to 16.79%. The U.S. Dollar Index fell 1.13% in March.20,21,22
Gold prices rose 2.1% in March, which helped the precious metal go +1.3% for 1Q 2011. On March 31, gold settled at $1,438.90 per ounce on the COMEX. As the month wrapped up, the 1Q performance of key precious metals was all over the map: +22.5% for silver (which hit peaks unseen since 1980), +0.3% for platinum, -4.4% for palladium. March was a banner month for oil, of course: NYMEX crude advanced 10.1% for the month to $106.72 per barrel at the close on March 31. Oil hasn’t has such a hot month since September, and the March advance brought the commodity’s 1Q gain to 16.79%. The U.S. Dollar Index fell 1.13% in March.20,21,22
REAL
ESTATE
There was no hiding it - even if you chalk part of it up to exceptionally rough weather or the considerable margin of error these numbers sometimes have, the latest home sales figures were exceptionally poor. The National Association of Realtors said that existing home sales fell by 9.6% for February, and were down 2.8% from a year before. The Census Bureau stated that new home purchases dropped by 16.9% in February to a point 28.0% (yes, 28.0%) below year-ago levels. The pace of housing starts slumped to 479,000 in February (a 22.5% monthly dive and close to the record low measured by the Commerce Department in April 2009); building permits touched a historic low in February.5,23,24
There was no hiding it - even if you chalk part of it up to exceptionally rough weather or the considerable margin of error these numbers sometimes have, the latest home sales figures were exceptionally poor. The National Association of Realtors said that existing home sales fell by 9.6% for February, and were down 2.8% from a year before. The Census Bureau stated that new home purchases dropped by 16.9% in February to a point 28.0% (yes, 28.0%) below year-ago levels. The pace of housing starts slumped to 479,000 in February (a 22.5% monthly dive and close to the record low measured by the Commerce Department in April 2009); building permits touched a historic low in February.5,23,24
Prices
slipped in the overall 20-city S&P/Case-Shiller home price
index for the sixth consecutive month – they fell 1.0% in
January, and were only 1.1% above the trough recorded in April
2009 (perilously close to a double dip).7
Some
good news could be found. Pending home sales managed to rise in
February by 2.1%. The average interest rate for a 30-year home
loan was still under 5% at the end of March: 4.86%, to be exact.
(It had moved 0.01% south since the March 3 survey.) Average
interest rates on 15-year FRMs, 5-year ARMs 1-year ARMs at the
end of March were respectively 4.09%, 3.70% and 3.26%.25,26
LOOKING
BACK…LOOKING FORWARD
The U.S. stock indexes managed to retain much of their 1Q gains during the turbulence of the second half of March. While some Wall Street analysts figured stocks were ripe for a pullback, the Dow, S&P and NASDAQ have set a terrific pace so far in 2011. In fact, in percentage terms, the S&P had its best opening quarter of a year since 1998 (+5.4%) while the Dow rose 6.4% for the 1Q, its best opening quarter of a year since 1994.27
The U.S. stock indexes managed to retain much of their 1Q gains during the turbulence of the second half of March. While some Wall Street analysts figured stocks were ripe for a pullback, the Dow, S&P and NASDAQ have set a terrific pace so far in 2011. In fact, in percentage terms, the S&P had its best opening quarter of a year since 1998 (+5.4%) while the Dow rose 6.4% for the 1Q, its best opening quarter of a year since 1994.27
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+6.41
|
+0.76
|
+13.48
|
+2.47
|
NASDAQ
|
+4.83
|
-0.04
|
+15.98
|
+5.11
|
S&P
500
|
+5.42
|
-0.10
|
+13.37
|
+1.43
|
| REAL YIELD |
3/31
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.99%
|
1.60%
|
2.35%
|
3.52%
|
Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 3/31/111,28,29,30
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into directly.
These
returns do not include dividends.
Stocks
have exhibited remarkable resiliency so far in 2011. We have no
crystal ball as to what the next three quarters will offer - just
some history to draw on for a moment. You may find this
encouraging: since 1950, the DJIA and S&P 500 have never had
a down year after rising this much in an opening quarter. The S&P
500 has had 25 years since 1950 in which its 1Q gain has been
4.0% or greater; in only two of those 25 years did it fail to
advance over the succeeding three quarters of the year. Of
course, the last few years (not to mention the last month) have
hardly been placid or gone according to the norm. Yet the bulls
don’t seem to be retreating from Wall Street, and with another
earnings season coming up and indications of a recovering job
market and sustained consumer spending, the economic engine of
America appears to be running more smoothly than in the recent
past.31
UPCOMING
ECONOMIC RELEASES:
The balance of April offers us the following reports: the March ISM service sector report and FOMC minutes (4/5), February wholesale inventories (4/8), March retail sales, February business inventories and a new Beige Book from the Fed (4/13), March PPI (4/14), March CPI, March industrial output and the initial University of Michigan April consumer sentiment poll (4/15), March building permits and housing starts (4/19), March existing home sales (4/20), the Conference Board LEI index (4/21), March new home sales (4/25), the February Case-Shiller home price index plus the Conference Board’s April index of consumer confidence (4/26), March durable goods orders and an FOMC meeting (4/27), the initial estimate of 1Q GDP and March pending home sales (4/28), and lastly the report on March consumer spending plus the final April consumer sentiment poll from the University of Michigan (4/29).
The balance of April offers us the following reports: the March ISM service sector report and FOMC minutes (4/5), February wholesale inventories (4/8), March retail sales, February business inventories and a new Beige Book from the Fed (4/13), March PPI (4/14), March CPI, March industrial output and the initial University of Michigan April consumer sentiment poll (4/15), March building permits and housing starts (4/19), March existing home sales (4/20), the Conference Board LEI index (4/21), March new home sales (4/25), the February Case-Shiller home price index plus the Conference Board’s April index of consumer confidence (4/26), March durable goods orders and an FOMC meeting (4/27), the initial estimate of 1Q GDP and March pending home sales (4/28), and lastly the report on March consumer spending plus the final April consumer sentiment poll from the University of Michigan (4/29).
*Registered Representative and Financial Advisor of Park Avenue Securities LLC PAS. Securities products/services and advisory services offered through PAS a registered Broker-dealer and investment advisor. Field Representative, The Guardian Life Insurance Company of America (Guardian) New York, NY. PAS is an indirect wholly owned subsidiary of Guardian. Wealth Design Group is not an affiliate or subsidiary of PAS or Guardian. PAS is a member FINRA, SIPC.
This
material was prepared by Peter Montoya Inc., and does not
necessarily represent the views of the presenting party, nor
their affiliates. This information should not be construed as
investment, tax or legal advice. The Dow Jones Industrial Average
is a price-weighted index of 30 actively traded blue-chip stocks.
The NASDAQ Composite Index is an unmanaged, market-weighted index
of all over-the-counter common stocks traded on the National
Association of Securities Dealers Automated Quotation System. The
Standard & Poor's 500 (S&P 500) is an unmanaged group of
securities considered to be representative of the stock market in
general. It is not possible to invest directly in an index. NYSE
Group, Inc. (NYSE:NYX) operates two securities exchanges: the New
York Stock Exchange (the “NYSE”) and NYSE Arca (formerly
known as the Archipelago Exchange, or ArcaEx®, and the Pacific
Exchange). NYSE Group is a leading provider of securities
listing, trading and market data products and services. The New
York Mercantile Exchange, Inc. (NYMEX) is the world's largest
physical commodity futures exchange and the preeminent trading
forum for energy and precious metals, with trading conducted
through two divisions – the NYMEX Division, home to the energy,
platinum, and palladium markets, and the COMEX Division, on which
all other metals trade. The Hang Seng Index is a free-float
capitalization-weighted index of selection of companies from the
Stock Exchange of Hong Kong. The SSE Composite Index is an index
of all stocks (A shares and B shares) that are traded at the
Shanghai Stock Exchange. BSE Sensex or Bombay Stock Exchange
Sensitivity Index is a value-weighted index composed of 30 stocks
that started January 1, 1986. Nikkei 225 (Ticker: ^N225) is a
stock market index for the Tokyo Stock Exchange (TSE). The Nikkei
average is the most watched index of Asian stocks. The FTSE 100
Index is a share index of the 100 most highly capitalized
companies listed on the London Stock Exchange. The CAC-40 Index
is a narrow-based, modified capitalization-weighted index of 40
companies listed on the Paris Bourse. The DAX 30 is a Blue Chip
stock market index consisting of the 30 major German companies
trading on the Frankfurt Stock Exchange. With a fixed number of
600 components, the STOXX Europe 600 Index represents large, mid
and small capitalization companies across 18 countries of the
European region. The S&P/TSX Composite Index is an index of
the stock (equity) prices of the largest companies on the Toronto
Stock Exchange (TSX) as measured by market capitalization. The
S&P/ASX All Ordinaries Index represents the 500 largest
companies in the Australian equities market. The MSCI World Index
is a free-float weighted equity index that includes developed
world markets, and does not include emerging markets. The MSCI
Emerging Markets Index is a float-adjusted market capitalization
index consisting of indices in more than 25 emerging economies.
The US Dollar Index measures the performance of the U.S. dollar
against a basket of six currencies. Additional risks are
associated with international investing, such as currency
fluctuations, political and economic instability and differences
in accounting standards. All information is believed to be from
reliable sources; however we make no representation as to its
completeness or accuracy. All economic and performance data is
historical and not indicative of future results. Market indices
discussed are unmanaged. Investors cannot invest in unmanaged
indices. The publisher is not engaged in rendering legal,
accounting or other professional services. If assistance is
needed, the reader is advised to engage the services of a
competent professional.
Citations.
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2
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8
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[3/31/11]
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[3/31/11]
21
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[3/31/11]
22
–
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[4/6/11]
