Closing the Book on Q1 2012
March 31 brought a close to a surprising quarter for equities. The S&P 500 turned in a performance of 12.6%, which is the best first quarter return since 1998. Yields on bonds remained near all-time lows, while there seems to be some erosion to investor zeal for gold and other commodities.
S&P 500: 12.6%
10Yr. Treasury: 2.22% (1.88% 1/1/12)
During the last five months of 2011 the S&P 500 Index closed 2% higher or lower than the previous day's closing price on 30% of all trading days. In the first quarter, there were no days when the market moved more than 2%. There were just five days when the market moved by more than 1% - and four of those days the market closed higher. Because most investors see volatility as a significant investment risk, the lower volatility likely helped to bolster investor sentiment. Our belief is that complacency is not an investment virtue.
That said, our view is one of appreciation tempered with concern. While we clearly see evidence of a US economy that is on the mend, it is still growing at a paltry GDP growth below 3%. The question that begs asking in our minds is: If the economy is on its way to health again, what would it look like if and when the “crutches” of easy money policy changes? We entered the quarter optimistic, but cautious. We end the quarter with the same sentiment. We are thankful for a good quarter and believe that it will likely not be matched the remainder of the year.
S&P 500: 12.6%
10Yr. Treasury: 2.22% (1.88% 1/1/12)
During the last five months of 2011 the S&P 500 Index closed 2% higher or lower than the previous day's closing price on 30% of all trading days. In the first quarter, there were no days when the market moved more than 2%. There were just five days when the market moved by more than 1% - and four of those days the market closed higher. Because most investors see volatility as a significant investment risk, the lower volatility likely helped to bolster investor sentiment. Our belief is that complacency is not an investment virtue.
That said, our view is one of appreciation tempered with concern. While we clearly see evidence of a US economy that is on the mend, it is still growing at a paltry GDP growth below 3%. The question that begs asking in our minds is: If the economy is on its way to health again, what would it look like if and when the “crutches” of easy money policy changes? We entered the quarter optimistic, but cautious. We end the quarter with the same sentiment. We are thankful for a good quarter and believe that it will likely not be matched the remainder of the year.
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