Since the beginning of this
year the stock and bond markets have been rather subdued. In 2013 the general
outlook was that the economy was picking up momentum. The increase in business
activity, business profits and a shrinking of government spending was seen
leading the economy back to “normal.” The results for the year were in
many ways more robust than what had been expected. More jobs were created, new
jobless claims dropped and the unemployment rate fell. As we came into the
first quarter of 2014 there was concern that economic growth was lagging. Jobs
were still being created, new jobless claims were still down and the greatest
number of people since the first quarter of 2008 were employed. The problem
with all of this was that the sense of “growth” in many sectors of the economy
wasn’t there in the first quarter. The S&P 500, as of this writing, is up
an anemic 0.0% for the year. As we await results from corporations for the
first quarter, it seems likely stocks will fall further. At the same time, the
slow growth of the economy has made bonds stronger. There is a reduced sense of
worry about inflation, business earnings are good and the Federal Reserve’s
pull back in the buying of bonds and mortgages has not disrupted day to day
bond trading. Overall what we are seeing is stability of the economy but with
no real growth impetus. It appears that bad weather in the first quarter,
coupled with no growth in Europe is what slowed down the economy. As we enter
the second quarter we may begin to see signs of a turn around. The European
Union is taking steps to grow their economy as Japan does likewise. These moves
along with better weather and the growth that is taking place in the U.S. may
be enough to get the momentum going again. For now, dividend paying stocks and
interest bearing bonds are what’s considered best!
Ed Mallon
