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last summer, long-term interest rates have actually declined by almost 1/2%.
Alan Greenspan, the Fed's chairman, in his public statements throughout February mentioned that the bond market was a "conundrum" to him over the past year. He was not sure why long-term interest rates have actually been declining as the Fed had raised short-term interest rates at their last six regular meetings.
Most other economic news disseminated throughout February was relatively uninspiring.
The biggest news throughout February was the continuing increase in the price of crude oil. The economic prognosticators however, continued to play down the impact of high oil prices on the U.S. economy.
Throughout February, the daily bombings continued without interruption in Iraq. The media and the public seemed to turn off to the mayhem in Iraq.
In addition, the results of the elections held on January 30th were on hold throughout February, as the different political factions tried to agree on some type of political coalition in Iraq.
March began with the bulls taking the lead in the stock
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market, but most major stock market indexes still remained solidly in negative territory for 2005.
The bears did finally get the upper-hand by mid March emboldened by the Fed's continuing rhetoric about their concern about rising inflation and their intent to keep raising short-term interest rates at a measured pace.
At the Fed's regular scheduled meeting in March, the Fed once again raised short-term interest rates by 1/4%.
The March hike in short-term interest rates was the seventh time in a row that the Fed raised short-term interest rates since June of 2004.
Crude oil prices continued to climb throughout March, closing the month near $60 a barrel.
The stock market remained negatively correlated to the price of crude oil throughout March, that is, as crude oil prices rose the stock market continue its decline.
The bond market finally took its cue from the Fed during March. Most bond prices fell throughout March, pushing bond yields higher.
Perhaps, the Fed's concerns about rising inflation in the
U.S. economy finally took its toll on the investment outlook for bond investors.
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Bond investors hate inflation as it erodes the value of their interest payments that they receive over time on the bonds that they own.
That is why when bond investors are spooked by inflation fears they sell off their bond holdings, lowering bond prices and raising the yield that the new buyers receive to off-set the affect of rising inflation on their interest income.
The violence and bloodshed continued throughout March in Iraq. Sadly, the media and the American public tuned the war out.
I remain sector specific investing in energy, gold mining, and commodity stocks for the core holdings of the portfolios that I manage for my clients.
This portfolio mix has produced positive gains for the portfolios that I manage for my clients in the first quarter of 2005, albeit losing some ground in March.
I have eliminated the Treasury
Inflation Adjusted Bonds in my managed portfolios in March as they continued to deteriorate in price along with traditional bonds as interest rates continue to rise.
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