The first quarter of 2011 turned out to be another volatile quarter for the markets. Unrest in the Middle East and North Africa, as well as a devastating natural disaster in Japan, set the backdrop for a volatile three months. Surprisingly, the markets were largely resilient, with the S&P 500 returning 5.9%. Small and mid cap stocks continued their surge, returning ~8.0% for the period. Overseas, returns were not as strong, but still positive for the period. Developed foreign markets returned ~3% while emerging markets returned ~2%. Broad fixed income indices were up between 0.5% – 3.0% for the quarter.
The economic themes that have weighed on the markets in recent quarters continued in the first quarter of 2011. Concerns over inflation and the price of oil, US municipals and European sovereign debt continued to create headwinds for the markets. At the same time, consumer confidence continues to creep upward, unemployment continues to creep downward, and corporations are by and large reporting record earnings. Real U.S. GDP came in at an annualized 1.8%, however, most economists are forecasting a full year 2011 GDP rate of between 2.80% and 3.25%. We expect the economic recovery and expansion to continue, albeit slowly, for the remainder of the year. While an uptick in inflation is certainly a possibility, we do not see inflation becoming a major problem in 2011.
Now that tax filing season has passed, we look forward to helping you review your financial plans throughout the Spring and Summer.
Please contact us should you wish to discuss any of these issues and how they relate to your personal circumstances.