2011 Market Update

I recently attended a 2011 Stock Market Update, hosted by Fidelity Investments. Some great information that I will try to highlight for you...

Global markets withstood the deluge of headline events (Middle East turmoil, Japanese earthquake and after effects...). Both U.S. and global economies continued slow growth in January-March

U.S. stocks registered broad-based gains led by small and mid sized companies, energy companies and industrial companies

Foreign stocks also rose led by Europe

Some positives related to U.S. markets:

• Economic activity remains positive
• Loose monetary policy continues to keep borrowing costs low
• Corporate earnings remain strong

Negatives related to U.S. markets:

• Geopolitical strife in North Africa and the Middle East
• Concurrent rise in energy prices

80% of the Leading U.S. Economic Indicators are increasing. Despite the headlines, the U.S. post-recession recovery is intact

Corporation and Manufacturing profit levels are almost back to pre-recession levels. Consumer spending, however, remains weak. Jobs recovery also remains weak. Many jobs lost during the recession will not return.

Additionally, construction and real estate are not improving quickly. New home sales are at a 50 year low

Interestingly, while real estate values are down, consumer net worth has increased, due in part to strong results from investments

None of the Fidelity analysts expect oil to hit $150 a barrel anytime soon and only if oil hits and is sustained at $120 a barrel will it put downward pressure on the U.S. recovery. Today OPEC has 5% in spare production available

Leading sectors this past quarter were Energy and Industrials, followed by Healthcare, Telecom, and Consumer Discretionary. Ironically, Consumer Staples earned the least. Consumers skimped on staples but instead bought discretionary products.

Fidelity analysts suggest we are in year 2 of the post-recession recovery. As we move into this "mid-phase" of the economic cycle, expect Industrials, Technology, Materials, and Healthcare to lead. But near term market gains are also expected to be muted when compared to the past two years. "The easy money has already been made."

Presently, Large Cap companies are relatively inexpensive

High Yield Fixed Income continues to lead the Bond markets but expect those yield to drop to high "single digit" this year

Currently, corporate appreciation and dividends is outpacing yields from bonds