Halleluiah! Finally a positive monthly return for the stock market!
Not only was it positive in absolute returns, it was a good relative month for our investment strategy with almost every asset class except large international and real estate outperforming the core US large company stocks. Therefore, our investment strategy provided superior relative returns in March. One month does not a trend make, but let’s be hopeful!
Based on the Dow Jones Industrial Average, March ended with a 7.7% return and it was the biggest monthly gain since October 2002 (which was up 10.6%). March broke a 6 month losing streak. For the quarter, the Dow was down 13.3%, its sixth straight quarter of losses. The last such period ended June 30, 1970. It was the worst first quarter since 1939 when the Dow was down 14.81%.
As of the close on April 2nd, the S&P 500 was up 25% from its intra-day low on March 9, 2009. Stocks took a major turn after March 9th, turning what would have been the 10th worst month in almost 20 years to the 4thbest. Talk about volatility!
Ibbotson Associates recently published the updated long-term stock market returns since 1926. The long-term US Large Company stock return fell from a 10.4% compound annual return over 81 years thru 2007 to 9.6% over 82 years thru 2008 due to the 2008 loss of 37%. That is almost a 1% change over 82 years which is a huge difference. The loss in 2008 was still "off the charts" with the worst returns within a 95% probability range being -33% or less. So 2008's loss of 37% hopefully won't be seen again during our lifetimes.
There are indications of a leveling off and rebounding in the some economic reports. April will be an interesting month as companies report first quarter earnings. The big question is whether we will have a "V" shaped, "U" shaped or "L" shaped recovery. We continue to be modest in our expectations for the balance of 2009 but optimistic looking out to 2010 to 2012.
As always, your trust and confidence are important to us and we appreciate the opportunity to serve you! Please contact us with any questions you have.
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