March ended on a positive note for risk assets, with only a few exceptions. Commodities, foreign government bonds in developed markets, and investment-grade U.S. bonds experienced slight declines. However, the overall gains in other sectors of the capital markets more than compensated for these losses. Consequently, our passive benchmark for major asset classes, the Global Market Index (GMI), registered an impressive increase of 3.4% last month. This marked the highest monthly performance since last September, which recorded a 3.5% rise.
While there is a singular U.S. stock market, numerous strategies exist for estimating the expected risk premium for domestic equities. These strategies generally fall into two main categories: fundamental and technical analysis. For instance, one might analyze various discounting methods of future cash flows to determine whether stocks are undervalued or overvalued. Additionally, several trend-following indicators could provide valuable insights. The key is finding the right mix. A compelling argument supports the regular analysis of various predictors for forecasting stock market trends, and other asset classes as well. This diverse approach creates a wealth of opportunities.
According to the latest ADP National Employment Report, nonfarm employment decreased by 23,000 this month compared to February, after seasonal adjustments. This disappointing development raises concerns that Friday’s employment report from the Labor Department may not offer positive news. Or could it?
Pimco’s Bill Gross anticipates the end of the 30-year bull market in bonds, as reported by Bloomberg News. This prediction isn’t new; many have sensed a shift for some time. In our newsletter and throughout these pages, we have argued that the prevailing trend for interest rates is likely upward over the long term. We hold firm to this expectation, but the challenge remains: timing.
Is the labor market finally poised for sustained job creation? Or will the stock market continue to overlook the slow recovery in employment? These pressing questions are likely to dominate discussions this week as we await Friday’s payroll update for March. Complicating matters is the timing: with the stock market closed for Good Friday, equity traders will have to wait until the following Monday to react to the news.
Yesterday, I participated as a guest on the financial talk show hosted by HorsesMouth.com. The topic of conversation was my new book: Dynamic Asset Allocation
http://www.blogtalkradio.com/horsesmouth/2010/03/25/modern-portfolio-theory-grows-up
While the newly enacted health care reform legislation may improve access to medical services, it does come at a cost to taxpayers in higher income brackets and certain investors. According to a report by RSM McGladrey, a consulting firm in Atlanta, many Americans will see increased taxes due to this new healthcare reform.
The U.S. Bureau of Economic Analysis reported this morning that the economy expanded by 5.6% at a real annualized rate in the last quarter of the previous year. This update is the third and final estimate for Q4 2009 GDP. Initial estimates were 5.7% and 5.9%, respectively. Although the final figure has been revised down from earlier estimates, a 5.6% gain in GDP for Q4 2009 still represents the fastest pace since the 6.9% increase in Q3 2003. The government is scheduled to release the initial estimate for Q1 2010 GDP on April 30. According to The Wall Street Journal, economic growth is not anticipated to be as robust in the first quarter of this year, with early estimates ranging from 2.5% to 3.0%.
Current discussions at the Federal Reserve include potential strategies for exiting current economic support measures, including a plan to sell off a significant amount of mortgage securities acquired over the past 18 months to aid the struggling housing market. Coincidentally, the Obama administration is reportedly launching a new initiative to tackle the persistent issue of foreclosures in the residential housing market.
This morning’s update on initial jobless claims indicates that our previous concerns about a rise in unemployment filings may have been unfounded. Fortunately, the Labor Department reported a decrease in new claims last week to 442,000, down 14,000 from the previous week. This is the lowest level for new claims since March 2009, with the exception of the first week of February. It seems appropriate to collectively breathe a sigh of relief.
