Back Where We Started From and the Race to November Mid Terms

Our headline today represents our humorous take on the levels of the capital markets as we enter the third month of the year with little forward movement in most areas, which is fine by us.   

The S&P 500, our favorite domestic index has a year to date return of less than 1%,  it’s small company brethren, the Russell 2000, has a positive print so far this year and the Fixed Income (Corporate, Treasury and non-high yield) returns, have had moderate changes as well.   

If you had closed your eyes at the first part of the year, and opened them yesterday, you would have thought it a boring first few months of the year. Not so much really!  Our “Choppy” theme, mentioned in our Q1 2010 Newsletter  (page 3) has been the occurence so far, but not for the reasons we had expected. Fears of Greek debt defaults spurred the first bit of choppiness in capital markets thus far.  We do not think this will be the only choppy event of this year.   

Economic Numbers Front and Center:   

Post 90 day treadmill, (earnings season) we turn our attention to the economic numbers for the next several weeks for clues on our economic growth.  The key economic number to keep an eye on, in our opinion, is employment related.

November Mid Term Elections

We have a race of sorts; the current government administration has great incentive to lower the unemployment rate with  November 2010 mid term elections looming, (yea we are already looking into November).  In our opinion, based on what we are hearing in recent company conference calls, employment is on the mend, but will be at a slower, more tentative pace, as companies are forced to beef up labor needs, making for an interesting summer of dialogue between parties, and possible photo finish in November.    

Lastly, the FED, as promised, will discontinue their purchase of Mortgage related securities this month. We are curious to see if rates have any immediate movement post big brother’s removal of the hand holding them down. We think the window for refinancing and super low rate mortgage purchase may be slowly closing. 

Have a Good Day! 


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