Domestic and international economies, led by manufacturing, have continued to expand through the first few months of the year, shaking off two catastrophic weather events (Japan earthquake/Tsunami and Mississippi River Flooding) and a series of geopolitical uprisings in the middle-east. This resiliency has produced the largest first quarter gain in the S&P 500 since 1998. U.S. equities have led the way, followed by international equities and commodities, while bonds have remained relatively flat.
Initial unemployment claims have continued to trend downward, albeit at a slow pace. By late April, the four-week average was 408,000 claims, down slightly from 414,000 at the beginning of the year. Overall job creation has improved slightly, adding 244,000 jobs in April. The unemployment rate, however, increased slightly to 9% from 8.8% in March.
Corporate earnings generally were positive for the first quarter of 2011; however, this good news was offset by reports slowing GDP growth and a spike in energy prices. First quarter GDP slowed to an annualized rate of 1.8% compared to 3.1% in the fourth quarter of 2010. There is some speculation that the natural disasters referenced above played into the muted results, but we believe a more likely culprit may have been the jump in energy and food prices, primarily gas and oil. The true impact of increasing oil prices is difficult to quantify, but most analysts believe that a price point above $120 per barrel, which translates to roughly $4.50 per gallon, could be a tipping point that would create significant downward pressure on the U.S. economy.
The consumer price index jumped in April, with core inflation bumping above 3% for the first time since October of 2008. The Federal Reserve, however, continues to be very accommodating to growth and indicated in their recent meeting notes that “longer term inflation expectations have remained stable.” Perhaps one of the strongest economic headwinds entering the second half of the year may be the geopolitical state of some middle-eastern countries. Political unrest in Egypt, Libya, and Syria have remained modestly tame by relative standards; however the threat of increased upheaval remains high. With the recent killing of Osama Bin Laden, the forward-looking reaction in these affected areas and the outcome of civil unrest remains largely uncertain. In summary, we remain cautiously optimistic that global and domestic economies will continue to expand at modest and uneven rates.
For a detailed look at the first quarter, visit www.sequoia-financial.com/market-perspective.
On the Sequoia home front, we are excited to announce the expansion of our team, once again, to better serve you. We have added three new employees to our Service Excellence Group in two of our offices. Patty Sweeney and Renee Jeffries have joined us in the Tampa office and Sue Haessly in our Cleveland office. Patty is a Client Relations Associate and Ohio native who relocated to Florida in the early ‘90s. She joins us from Bank of America. Renee comes to us with more than 20 years of financial and administrative experience and will fill the role of Operations Associate. In Cleveland we welcome Sue as Operations Associate who brings with her more than 20 years of retirement plan services and trust operations experience. The addition of this talented group exemplifies our commitment to client service, and we’re certainly excited to have them on our team.
This year marks our 20th year in business. As we recently communicated to you separately, with this milestone comes another—the launch of Sequoia’s new logo and new website (sequoia-financial.com). As the site continues to evolve, we hope to make it a valuable resource for investment commentary, account access, and information on our employees and services.
We are extremely grateful for your devoted trust, support and business over the last 20 years, and we look forward to building the next 20 years together. Our clients are our greatest asset, and we remain devoted to earning your continued business each and every day.
Best wishes for a prosperous summer and please feel free to contact any Sequoia team member with any questions.
Regards,
Sequoia Financial Advisors, LLC
Sources:
Algonquin Advisors, LLC Q1-2011 Global Macro Economic Review Bureau of Labor Statistics www.bls.gov
ValMark Advisors, Inc.
www.inflationdata.com