First-Quarter 2012 Market Recap

(For the quarter ended March 30, 2012.)

U.S. stocks posted their best first-quarter returns in more than a decade, propelled by growing investor optimism about the U.S. economy, as well as improving sentiment regarding worldwide growth in general and Europe’s debt problems in particular. However, the run-up wasn’t limited to U.S. equities: Several markets in Asia and Europe, including those in Germany and Japan, also experienced their best first quarter in years. Among the quarter’s high-flying U.S. stocks were Bank of America, up 72%; Apple, up 48%; and JP Morgan Chase, which rose 38% in the first three months of the year. The tone was set early, as a post-holiday surge inspired by upbeat economic news helped kick off 2012 on a high note. U.S. nonfarm payrolls increased by 200,000 and unemployment dropped to 8.5% in January, while news of higher factory orders and auto sales also helped bolster investors’ confidence in the U.S. economy. Unemployment then fell again in February, and Greece’s parliament approved strict financial reforms needed to obtain international bailout funds, further boosting equity prices. By mid-March, the S&P 500 was above 1400 for the first time since 2008, where it stayed for most of the rest of the month.

Through

3/30/12*

 Quarter 1-Year 3-Year 5-Year Closing Value
S&P 500 12.0% 6.2% 20.9% -0.2% 1408.47
Dow Jones Industrials 8.1% 7.2% 20.2% 1.4% 13,212.04
Nasdaq Composites 18.6% 11.2% 26.5% 5.0% 3091.57

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Fed outlook The March 13 FOMC meeting statement said that although “significant downside risks” remain, “strains in global financial markets have eased,” slightly improving the Fed’s economic outlook.

Fixed income U.S. Treasuries suffered their worst quarter since 2010 as investors moved out of safer assets and back to stocks, according to The Wall Street Journal. The 10-year Treasury yield rose during the quarter to 2.21% from 1.88% at the end of December. Treasury yields have an inverse relationship to price.
Commodity prices Oil prices rose to $103.26/barrel on Friday, March 30, up from $99/barrel, at the beginning of January. Gold prices rose modestly — moving to $1,666/ounce, from $1,534/ounce at the end of 2011 — boosted by weakness in the dollar and by expectations that U.S. interest rates will remain low for an extended period of time.