- Once again, U.S. stocks extended their rally in the month of February. Small caps led the pack, while emerging market equities sold off marginally amid the political unrest in the Middle East and North Africa.
- Treasury yields held steady, allowing traditional bonds to provide fractional gains for the month. Longer-term municipal bonds recovered nicely following the recent sell off.
- The pace of economic growth was revised downward for the fourth quarter, although personal consumption remained on the upswing.
- Energy costs continue to push headline inflation higher. Significant slack in the economy and tepid wage gains should prevent core inflation from rising to uncomfortable levels in the near-term.
Life in the slow lane…
Speed limits in the U.S. have traditionally been set on a state-by-state basis and vary somewhat across the country. Many states differentiate between urban and rural interstates, but the range is quite broad – from 50 mph in parts of Hawaii to 80 in certain portions of Utah and Texas. It’s also not unusual for states to have lower limits for trucks, by as much as 15 mph below the posted speed for cars. The rationale for the variation in speeds between cars and trucks is primarily a factor of weight. As physics would explain, the greater the mass, the greater the stopping distance needed for an object in motion. Varying speeds results in comparable reaction times for the two vehicles. On the other hand, many states employ what’s referred to as high-occupancy vehicle (HOV) lanes (a.k.a. car-pool lanes), which purport to get you from point A to point B faster and more reliably, with the catch being that more than one occupant must be in the vehicle. So how is this relevant from an economic perspective? Outside of greater government revenues from violators of the posted traffic laws, we’d argue that the world economy is in a similar circumstance today with varying speeds of growth expected across the globe.