Market Perspectives (February 2011)

by Jim Baird on February 24, 2011

Executive Summary

  • Larger company stocks continued their rally, while investors pared back gains for small caps.  International equities also rose, and the falling Dollar added to gains for U.S.-based investors. 
  • Traditional bonds were relatively flat in January.  Municipal bonds continued to be challenged by debt and liquidity concerns.
  • GDP growth turned positive in the fourth quarter pushing the economy from a recovery phase to expansion. 
  • The Fed reiterated their intent to maintain the asset purchase plan.  The long-end of the Treasury curve continued to rise, while short-term rates remained near zero. 

From supersized to downsized…

The 90s was an era in which the mantra was “the bigger the better.”  Everything from food portions to tech stock prices, personal credit balances to urban sprawl.  It was an era of prosperous economic times with strong economic growth, relatively low interest rates, and moderate inflation.  The environment appeared to have led the way for a focus toward maximization of utility or just an overactive id with waning impulse controls for consumers.  As the desire for current gratification grew, the savings rate fell from 7% in 1990 to just 2% in 1999, home sizes grew, SUVs exploded in popularity, technology stock prices soared, and food portions were supersized.  When the decade turned, many of these trends stalled or even reversed course altogether. 

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