|
|
|
|
|
The
DJ-30 on the other hand, finished February slightly in positive
territory for 2002. Investors embraced the old economy stocks
of the DJ-30 and discarded their NASDAQ stocks
in February in an attempt to bolster the safety of their
stock portfolios.
Against this back-drop, throughout February the news being
disseminated to the investment public in reference to the
state of the U.S. economy, actually wasn't all that bad.
Many economic barometers began to show some positive gains,
and many Wall Street pundits actually started to predict
that the U.S. economy was in the process of recovering from
the recession.
In actuality, the U.S. economy never went into a recession
in 2001, as the technical definition of a recession is two
declining quarters of Gross Domestic Product (GDP). The
only declining quarter recently, was the third quarter of
2001. The fourth quarter of 2001 actually grew at 1.7%
annual growth. All the pain inflicted on corporate profits,
and unemployed workers, happened so far in a
non-recession.
The recession was pronounced in the last quarter of 2001
by the National Bureau of Economic Research (NBER) as having
been initiated in March of 2001. The NBER is a private organization
of primarily academic
|
|
|
|
|
|
|
|
|
|
|
economists
that has no allegiance to follow the conventional definition
of recessions in their pronouncements.
March began with most major stock market indexes gaining
some upward momentum as investors embraced the news being
released depicting a rebounding U.S. economy.
The bond market lost its steam in March as bond investors
sold off their bonds, fearing that the Federal Reserve (Fed)
would reverse its course and start to raise interest rates
in an attempt to cool off the growing U.S. economy. The
Fed is always on the lookout for the potential of inflationary
pressures being resurrected for the U.S. economy.
Inflation from the Fed's perspective is the by-product of
healthy economic growth, even though their thesis
has not been accurate for the past decade. Remember that
the Fed starting raising interest rates in mid 1999 to cool
off the U.S. economy. Inflation was not an issue at the
time. The Fed did in fact succeed in cooling the U.S. economy
in 1999, laying the foundation for the "quasi recession"
that started at the end of 1999, lasting until early 2002.
The Fed decided to leave interest rates unchanged at their
regularly scheduled meeting on March 19th. That was the
second time they left interest rates unchanged since the
end of 2001. In 2001, the Fed low
|
|
|
|
|
|
|
|
|
|
|
ered
short-term interest rates eleven times to try to bolster
the ailing U.S. economy.
The Fed did in
fact succeed in lowering money market rates from 6.5%
in early 2001, to 1.5% by the end of March 2002 (ouch!),
hurting the pocketbooks of retirees who depend on the interest
income from their savings.
March ended about where it started for most major stock
market indexes, with the technology laden NASDAQ the biggest
loser, ending the month of March in significantly
negative territory.
The war in Afghanistan continued with no significant events,
albeit, U.S. military casualties increased. The "terrorists"
spared the U.S. throughout the first quarter of 2002, but
the Israeli-Palestine conflict, escalated. Wall Street however,
seemed immune to any potential fallout on the financial
markets. Ho Hum!
I remain very cautious as to the over-all stock market,
as most stocks are still very pricey. I did however, increase
the holdings for my clients in the energy, health care,
and gold mining sectors during the first quarter. I still
remain committed to short-term Government AAA bonds
for the foreseeable future, in order to bolster the
safety of my clients portfolios.
<-- Previous Page Home
|
|
|
|
|
|
|