- Domestic equities extended their gains in March, capping the best quarter for stocks since 2009. International equities were negatively impacted by signs of global slowing and lost ground during the month.
- Growing optimism around the jobs market and an easing in global tensions contributed to a rise in long-term Treasury yields in March, which acted as a headwind to bond market returns.
- While the economy ended 2011 on a high note expanding at 3.0%, expectations for the first quarter of 2012 are for a modest slowdown in growth to just 2.0%.
- Job creation in March was a disappointment to the markets, although the unemployment rate dipped to a three-year low of 8.2% as more workers left the workforce.
- The Federal Open Market Committee recently noted that it expects moderate growth and a gradual reduction in the jobless rate in the quarters ahead.
I saw the sine…
Imagine the sound that resonates when a wet finger is run around the brim of a crystal glass. The pure tone of the musical note that’s emitted could be defined by its soft, sweet timbre or high pitch, but in physics the description is far less eloquent. Instead, sound of such a pure tone would be depicted by a sine wave, a mathematical function that describes a smooth repetitive oscillation, generally characterized by its amplitude (magnitude of change) and frequency (number of occurrences over a period of time). Interestingly, the search for an image describing an economic cycle would return virtually the same graphic, which starts at a midpoint and moves up, down, and back up again in a smooth, oscillating pattern over time. But just as a visual illustration of sound waves would fail to capture the essence of a beautiful melody, the textbook graphic of a business cycle doesn’t truly capture the volatility and unpredictability that can accompany the cycle over time. This peak-to-trough repetition in the economic cycle has been evidenced time and again throughout history, and its severity can be measured by the same variables that can define the volume and pitch of a sound wave: the magnitude of change and duration between intervals.