February 2011 Monthly Recap

By
Posted on May 4th, 2011

Market Update – A Recap Of February

News headlines in February were not investor friendly with revolutions in Egypt, Libya, and others coinciding with higher food and energy costs across the world. As I write this, protestors pass by our office, signs in hand, to voice their disapproval for legislation meant to reduce the strength of government workers’ unions. This clash is similar to what is occurring at other states between incoming governors anxious to slash budget deficits and government workers’ unions.

The equity markets however; continued climbing powered by continued earnings and robust economic data. Volatility in the markets has increased coinciding with unrest in the Middle East and other emerging markets. Small companies continue their impressive run of outperformance over larger companies. The revolutions in many emerging markets overshadowed any debt issues in Europe, although we expect European debt tremors to recur throughout the first half of the year.

The fixed income market normalized a bit in February. With steady interest rates along most maturities, the general bond market had a boring month, which was nice to see. Lower credit quality bonds (aka “High Yield” or “Junk”), consistent with continued risk appetite and their correlation to equities, had another great month. Municipal bonds regained some ground that has recently been lost to concerns over state budgets and a new conversation of allowing states to declare bankruptcy.