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January 2012 Monthly Newsletter


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The equity markets (as measured by the S&P 500, Dow and Nasdaq) kicked off 2012 with an impressive January performance, posting the best gains since January 1997.  The Dow was up 3.3%, S&P up 4.4% and the Nasdaq up 8%.

There continue to be positive signs for the overall economy.  Domestically, manufacturing increased more than expected in January and was the strongest in seven months. Also, China and Europe reported better than expected manufacturing results.

Likely the biggest U.S. headliner was the January Labor Department report that we added 243,000 jobs (much more than expected) and the jobless rate fell to a multi-year low of 8.3%.  Regarding individuals, personal spending continues to improve.  Spend America!

While things are not all rosy for sure, at least there continue to be modest indications of economic growth.  In his testimony to Congress Fed Chairman Ben Bernanke suggested that the pace of growth in the economy should increase modestly this year.  He noted that housing and the European debt issues are the biggest issues.

Fortunately, construction spending nationally has increased for the past five months.  In my small neck of the woods, I see some pockets of new residential construction, which has been absent for several years.  In my humble opinion, the housing market is the key issue preventing the economy from entering a much stronger growth phase.  Hopefully, we are seeing signs of stabilization and the beginning of a new growth phase.

Lastly, since the beginning of last October, the equity markets have moved significantly higher with minimal pauses.  Given economic conditions have not dramatically improved in four months, it is reasonable to expect a pause or some consolidation to occur.  It can be a healthy sign for the markets to take a breather: let’s hope it is just a small nap!

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