April 2010 – Market Commentary

Overview
• The US economy grew at an annual rate of 3.2% in the first quarter.  Although slower than the fourth quarter of 2009 – the underlying trends of manufacturing growth, strong consumer spending, and low inflation – are encouraging.   The turmoil in Europe and the difficulty smaller business still face in borrowing continue to dampen broader enthusiasm.

• For the remainder of the year, the direction of the economy – and security prices – will be driven by corporate earnings, employment, broader economic measures such as those associated with housing and manufacturing, inflation, and the regulatory changes being enacted in the US and throughout Europe.  Unforeseeable events may have the greatest impact on prices in the short term.

Economic News
• The US economy grew at an annual rate of 3.2% in the first quarter.  Although slower than the fourth quarter of 2009 – the underlying trends of manufacturing growth, strong consumer spending, and low inflation – are encouraging.   The turmoil in Europe and the difficulty smaller business still face in borrowing continue to dampen broader enthusiasm.

• Employers added 162,000 jobs in March; the biggest monthly gain in three years, and jobless claims fell slightly.  The rate remains high at 9.7% however, and the average length of unemployment rose to the highest point since recordkeeping begin in 1946: more than 31 weeks.

• Inflation has remained low although raw material and other producer costs jumped in March.  The Federal Reserve remains split on its inflationary outlook and has decided to keep rates low.  We expect the Federal Reserve will continue to monitor inflation closely and begin to raise the fed funds rate accordingly.  Current bond prices reflect the expected inevitable impact of

Regulatory News
• The Federal Deposit Insurance Corp.’s board on Tuesday extended its TAG (Transaction Account Guarantee) program providing unlimited deposit insurance for certain business accounts.  The program was set to expire June 30, 2010 and is now set to expire December 31, 2010.

Market News
• The US equity rally continued through April driven by institutional investor confidence in corporate earnings – despite lingering trouble in housing, debt levels, and lending.   The S&P 500 has gained 1.58% in April.  The debt crisis in Greece has precluded European markets from participating in the rally and the international stock index fell .75%.  Investment grade bonds have remained steady, returning 1% in April, led again by corporate bonds.

Index Performance – April:
US Large Cap Stock (S&P 500) +1.58%
International Stock (FTSE AW ex US) -0.75%
US Broad Bonds (Barcap Aggregate) +1.04%
US Government Bond (Barclay’s Govt) +0.95%
Cash (ML 3 Mnth T-Bill) +0.02%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

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