Quarterly Market Commentary – Q309
What a difference a year makes
While it was only 12 short months ago, the memory of September 2008 has grown faint for many people.
· Proclamations abound that the recession has likely ended.
o Direct market intervention by the government, combined with fiscal and monetary stimulus, has proven mostly successful.
o Efforts to staunch bleeding in the housing market, repair impaired conditions in the banking industry, and restore investor and consumer confidence have helped stabilize and improve economic activity.
· Financial markets have rallied off early-year lows.
· But the strength of the recent recovery should not be taken for granted.
o Concerns linger related to housing, employment, and wage growth
o These may pose headwinds to a robust and sustainable recovery.
Stocks extend gains
· Domestic stocks rallied, extending their ascent from the March 9 bottom:
o The Dow Jones Industrial Average gained 15.8 percent in the quarter, ending 13.5 percent higher year-to-date.
o The S&P 500 Index rose 15.6 percent for the July–September period—up 19.2 percent for the year.
o The Nasdaq Composite rode a surge in technology names to a 15.7-percent quarterly gain and a 34.6-percent increase for the year.
· Foreign stocks slightly outpaced U.S. counterparts:
o The MSCI EAFE and MSCI Emerging Markets indices gained 19.5 percent and 20.1 percent, respectively.
o The emerging markets index has gained a striking 61.2 percent in 2009.
Incentives spur growth
Economic data on several fronts surprised to the upside, in part fueled by significant government incentives to spur consumer action.
· A tax credit for first-time home buyers led sales of existing single-family homes higher from April to July, including a 7.1-percent monthly jump in July.
o Sales in August, however, declined a surprising 2.7-percent.
· The tax credit expires November 30.
o Delinquencies and foreclosures still weigh on the market.
o Congress may consider an extension or a reincarnation in the future.
· Automobile sales rebounded, boosted by the Cash for Clunkers subsidy.
o Sales recovered from multidecade lows to reach 11.2 million and 14 million annualized units in July and August, respectively.
o Absent the subsidy, which expired in August, September annualized sales regressed to 9.2 million, near an all-time low.
|
