There is a saying about March weather that it can come in like a lion and go out like a lamb. This year it seems that adage applied to the stock market. The first trading day of the month saw the S&P 500 roar its way to a new all-time high. However, from March 2nd through the end of the month it whimpered and declined 2.34%.
Reflecting on the first quarter of 2015, we saw an increase in volatility and basically no movement in equity prices with the S&P 500 up just 0.44% year-to-date. Interestingly, this type of environment tends to favor active versus passive (index) investing such that smart stock-picking can help generate better returns. However while the 1st quarter wasn’t impressive, it was the 9th straight positive quarter for the S&P 500. Sam Stovall of S&P Capital IQ points out that “Only three other times since WWII has the S&P 500 witnessed nine straight quarters of price gains. Each of these prior times recorded price increases in their 10th quarter averaging 8.1%.”
On the economic front, I expect the price of oil to stabilize in the $45 – $50 range for West Texas Intermediate (WTI). While this level is great for consumers due to lower prices at the pump and to heat their homes, it does negatively impact the energy sector by reducing employment and capital investment. The strong US dollar is hurting exports as our goods are now more expensive to overseas buyers. It also hurts profits earned overseas by multi-national corporations. I feel job growth in the US will remain positive but not as strong as it has been recently and the unemployment rate will remain around 5.5%. Consumer confidence remains high (Conference Board Consumer Confidence Index®, improved in March 2015 to 101.3) but consumers are spending less and saving more as of February 2015 (Commerce Dept 3-30-15). The net effect is that economic activity, as measured by Gross Domestic Product (GDP), may slow from around 3.0% to closer to 2.0% annually.
Overall, I remain optimistic on the economy and the investment outlook for the balance of the year. Some of the risks I continue to monitor include:
- risk of a sharp slowing in China with financial spillover globally;
- fears of intensifying and widening conflict in the Middle East;
- geopolitical stresses associated with war in Ukraine with material consequences for European growth.
- continued upward pressure on the dollar.
- risk of a more anemic recovery in home construction;
- a variety of fiscal “speed bumps,” including the US debt ceiling.
April Calendar of Events (comments and additions for future months are always welcome)
- April is a month with some important religious and historic holidays.
Let’s pray for tolerance of all races, religions, and lifestyles.
April 4th Passover begins
April 5th Easter Sunday
April 7th World Health Day
April 12th & 13th Eloise and I adopted Coco on 4/12/10 and Buddy on 4/13/13
April 15th Tax Day
April 16th Holocaust Remembrance Day
April 22nd Earth Day
April 23rd Take you child(ren) to work day
April 25th My oldest daughter – Satya’s birthday (she is running a 5k that day)
Sources: Raymond James, Zacks Investment Management, Yahoo Finance.
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