- An apparent slowdown in economic indicators and a widening of the economic slowdown across Europe prompted domestic equities to lose ground in April, after four consecutive monthly gains. International equities continued to lag their domestic counterparts, posting negative returns again.
- Reduced investor risk appetite prompted a modest flight to quality which drove long-term Treasury yields lower, while pushing bond returns higher in April.
- GDP growth was an estimated 2.2% in the first quarter, slower than in the prior quarter and fractionally below expectations. The FOMC maintained the status quo at its April meeting, while speculation is now increasingly focused on policy after the end of “Operation Twist” in June.
- April job growth disappointed, although the unemployment rate dipped to 8.1% as an estimated 342,000 individuals left the workforce.
It’s been nearly two years since Fed Chairman Ben Bernanke warned of an economic climate situation that appeared “unusually uncertain.” Today, it seems that much of that uncertainty remains unreconciled. The economy has managed to meander forward, albeit at a lackluster pace, being kept afloat by the massive amounts of fiscal and monetary stimulus injected since the Great Recession. Each round of quantitative easing has been followed by another of some form, while tax cuts and unemployment benefits have, thus far, continued to be extended. Meanwhile, the Eurozone crisis has emerged from its hiatus to once again stoke global fears, as both the U.K. and Spain have recently succumbed to double-dip recessions while other countries in the region are slowing considerably or contracting. Although significant policy actions orchestrated by the European Central Bank temporarily assuaged some near-term fears, those actions now appear insufficient as yield spreads have once again begun edging higher.