Market Commentary: First Quarter, 2009

Stocks Embark on a Torrid, But Bumpy Run

2008′s negative market momentum continued through early March with another 25% drop for stocks.  However, stocks embarked on a torrid run near the end of the first quarter.  Our U.S. market benchmark fell 11% in the first quarter and is down 38% over the past 12 months.

Sector Indexes

The long-running recession is taking another bite out of equity returns, and the uncertainty raised by the U.S. government did not help.  Consequently, the service super sector fell more than 13% due in large part to the financial services sector, which was the worst-performing sector.  The information super sector was the best-performing super sector, down 1%.  Part of the information super sector’s resiliency is the strength of recurring maintenance fees that many firms generate in conjunction with product sales.  The manufacturing super sector continues to suffer in line with the broader economy, turning in a loss of about 12%.

Style & Cap Indexes

Unfortunately, the broader equity markets over the quarter look strikingly like riding a roller-coaster.  The good news is that our growth index held up admirably given the global slowdown, down just 1%.  The bad news is that our core index was down 13% and even worse, value fell 16%.

Bonds & Bills

Signs of thawing emerged in some sections of the economy in the first quarter.  Orders for durable goods, a key economic indicator, rose unexpectedly by 3.4% in February for its biggest gain in a year.  New homes sales also reversed the downward trend with a year-on-year gain of 4.7%.  Damping hopes for any quick reecovery was continued weakening job market.  The Federal Reserve buoyed the fixed-income markets with its stated intentions to buy $300 billion of long-term Treasuries and $1.45 trillion of mortgaged-backed debt.  The corporate bond markets, in contrast, continued to slide.  Our core bond index gained a modest 0.30% for the quarter.

Commodities

Many commodities swooned from the start of 2009 to about mid-February as global economic concerns sapped expectations for near-term demand for many products.  Admidst this economic brown-out was a flight to safety reflected in a sharp strengthening of the U.S. dollar, further undercutting the ability of some countries to pay for commodty imports.  However, conditions had changed by late February.  Several global fiscal policy actions were announced to stanch the global economic bleeding.