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April 2012 Monthly Newsletter


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For the month of April, the Dow ended almost exactly where it started, while the S&P and the Nasdaq incurred mild losses (down .78% and 1.4%, respectively).  However, volatility (as measured by the VIX) spiked up April.  For example, it seemed like the Dow was up or down 80, 90 or 100+ points almost every day.

This increase in volatility was not so much a seasonal thing, as it was our spring-summer “buddy” the European Debt Crisis whom apparently hibernates during the winter and emerges like a polar bear in spring.  My assessment of April: when the U.S. economy was the headliner, markets did well, yet when Europe was, the markets did poorly.  Not that history will repeat itself again, but we have all experienced this pattern the last two spring-summer seasons.  Here is hoping 2012 will not be similarly neurotic.

Let’s focus on the U.S. economy.  It may be hard to believe, but the current recovery is in its third year.  The Commerce Department reported that first quarter 2012 GDP was +2.2%. This number represents moderate growth, which has been the case for most of the recovery.  Hopefully, we are “slowly” building a foundation for a period of sustained growth, as opposed to a rapid recovery followed by a hard landing – so far so good.

It is understandable why many people don’t feel this as a recovery, given unemployment is above 8% and housing prices are at multi-year-lows: these issues are moderating the recovery, but by no means stopping it.  If domestic equities are a reflection of the recovery, then things have dramatically improved (e.g., the Dow, S&P 500 and Nasdaq are all more than 100% above their March 09 lows)!

Consider this.  Manufacturing is a significant component in the U.S. economy and the auto industry is one of the largest. The Commerce Department reported that in April the annual sales rate increased to 14.4 million units.  That is almost 50% above the 09 levels.

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