March 2009 Recap

The market fared much better in March than they did in the first two months of the year. The S&P 500 hit a new low on March 9, but was lifted by optimism within the financial sector as Citigroup, Bank of America and JPMorgan said they were profitable in January and February. The Treasury’s plan to remove toxic assets from banks’ balance sheets as well as the Fed’s pledge to buy Treasuries and bonds backed by mortgages helped extend the gains.

All sectors in the S&P 500 finished the month higher. Defensive sectors such as utilities, telecom and consumer staples lagged as investors favored beaten down sectors with more upside potential. Financials, materials, consumer discretionary and technology were the best performing sectors in the S&P 500 this month.

Materials were boosted by inflation expectations as well as speculation that stimulus packages throughout the world will increase demand. Consumer discretionary benefited from bargain hunters hoping the worst of the economic decline is near. The technology sector finished the quarter in the black and continues to be viewed positively by investors for their healthy balance sheets with tons of cash and strong growth prospects.

International shares saw gains similar to those in the U.S., but the MSCI Emerging Markets index gained 14.27 percent in March and is up 0.69 percent year-to-date. Investors anticipate emerging markets will to continue growing at better rates than most developed nations, even if their growth rate is slower than in years past.

Alternative asset classes trailed stocks. REITs continue to struggle as investors shun their high debt levels. In addition, a slowing economy is keeping rents and occupancy down. Commodity posted modest gains on improved economic outlooks and orderly supply control. Nearly all commodities rose on long-term inflation expectations relative to recent fiscal policy actions.

Fed programs aimed at purchasing $300 billion in Treasuries drove yields down across the entire curve in the month of March. Yields on the two- and ten-year dropped 17.4 bps and 35 bps respectively, to leave the benchmark curve at +186.3 bps.


Peter Lazaroff, Junior Analyst