European Political Concerns Slow Down Rally
Monthly Market Recap
April 30, 2012 
Jeff Branstad, CFA
Investment Product Management
The 2012 stock rally backtracked a little during April as political upheaval in Europe brought back worries about how those countries will handle their debt struggles. Back-to-back reports of softer U.S. employment figures also contributed to the flat to negative monthly returns. Here is a look at market details for March 2012:
By The Numbers
Market activity in March, as reflected in the most common market indexes we follow.
| Equity Indexes* | 1-Month | YTD | 2011 |
|---|---|---|---|
| Dow Jones Industrial Average1 | 0.2% | 9.0% | 8.4% |
| S&P 500 Index2 | -0.6% | 11.9% | 2.1% |
| Russell 2000 Index3 | -1.5% | 10.7% | -4.2% |
| MSCI EAFE Index4 | -2.0% | 8.7% | -12.1% |
| MSCI Emerging Markets Index5 | -1.2% | 12.8% | -18.2% |
| Bond Indexes* | 1-Month | YTD | 2011 |
|---|---|---|---|
| Barclays U.S. Aggregate Bond Index6 | 1.1% | 1.4% | 7.8% |
| Barclays 20+ Year Treasury Index7 | 4.7% | -2.4% | 33.8% |
| Barclays U.S. Corporate Investment Grade Index8 | 1.4% | 3.5% | 8.2% |
| Barclays U.S. High Yield Index9 | 1.1% | 6.4% | 5.0% |
| Barclays Municipal Bond Index10 | 1.2% | 2.9% | 10.7% |
* Past performance is not indicative of future results. An investment cannot be made directly in an index.
| U.S. Treasury Yields | As of 4/30/2012 |
As of 3/31/2012 |
As of 12/31/2011 |
|---|---|---|---|
| 3-Month U.S. Treasury Bill | 0.10% | 0.07% | 0.02% |
| 5 Year U.S. Treasury Bond | 0.82% | 1.04% | 0.83% |
| 10 Year U.S. Treasury Bond | 1.95% | 2.23% | 1.89% |
| 30 Year U.S. Treasury Bond | 3.12% | 3.35% | 2.89% |
European Turmoil
Both France and Greece recently elected new presidents that signal their citizen’s growing discontent with austerity measures meant to help reduce national debt. Local elections in Great Britain and Germany also seemed to repudiate the party leaders that have pushed for austerity and deep budget cuts. Even the Netherlands, which has largely avoided most people’s watch lists, saw its governing coalition fall apart while trying to negotiate budget cuts to get its deficit percentage below the level dictated by the European Union. All of these changes cast a lot of uncertainty in to the markets, which will generally cause negative reactions until the uncertainty is removed.
Earlier in the month, Spain saw its debt get downgraded by S&P to BBB status, which caused a spike in its yield rates. Italy, another country that has struggled to control its debt, also experienced yield increases throughout the month.
U.S. Economy Still Growing, But Slows Somewhat
The initial April non-farm payroll employment data indicated that the U.S. added just 115,000 jobs for the month. Blunting that somewhat was a revision to the March employment number, which increased from an initial estimate of 120,000 to 154,000. However, both months are well below the 252,000 average numbers of jobs added during December 2011 through February 2012. Despite the slowdown in growth, the numbers were still positive and the unemployment rate ticked down slightly to 8.1%.
Similarly, the initial first quarter GDP estimate was a little softer than previous quarters, coming in at 2.2% growth. Again, though, the previous number was revised upward to 3.0% growth. The U.S. economy has experienced relatively steady growth over the past couple of years, but that growth continues to be at a very slow pace.
1 The Dow Jones Industrial Average is an index of 30 "blue chip" stocks traded in the U.S.
2 The S&P 500 Index is a widely followed index, and is composed of 500 widely held U.S. stocks
3 The Russell 2000® Index measures performance of small-cap stocks
4 The MSCI EAFE Index measures developed-economy stocks in Europe, Australasia and the Far East
5 The MSCI Emerging Markets Index measures developing-economy stocks
6 The Barclays U.S. Aggregate Bond Index measures performance of a wide variety of publicly traded bonds
7 The Barclays 20+ Year Treasury Index measures performance of longer maturity treasury bonds
8 The Barclays U.S. Corporate Investment Grade Index measures performance of the investment grade bond sector
9 The Barclays High Yield Index measures performance of the high yield bond sector
10 The Barclays Municipal Bond Index measures performance of the municipal bond sector
Insights from Thrivent Asset Management discuss the financial markets, the economy and their respective effects on investors. Writers’ opinions are their own and do not necessarily reflect that of Thrivent Financial for Lutherans or its members. Forecasts, estimates and certain other information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.
Asset management services are provided by Thrivent Asset Management, LLC, a wholly owned subsidiary of Thrivent Financial for Lutherans. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, 800-847-4836, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent Financial for Lutherans.
All information and representations herein are as of 3/31/12, unless otherwise noted.
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