Market Commentary

April Market Recap

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The Price of Gasoline

High gas prices have probably been getting your attention as of late.  While higher prices have definitely hit your pocketbook and may have altered your driving habits, on a broad level high gas prices are beginning to pose a threat to the current economic recovery.  Most alleged experts estimate that the U.S. economy will not be truly threatened unless oil prices reach $140 to $150 per barrel, but whether we reach that point or not, people are still clearly being affected by prices that are nearly three times higher than in early 2009.  If prices remain this high it’s inevitable we’ll also soon see higher prices of goods and services subject to transport. 

Oil prices have historically risen from Winter into early Summer as demand increases into peak travel season, but this year’s increase has come a bit early and appears to be driven as much by price speculation as actual demand.  Keep in mind current oil prices of $114 per barrel are still well off their all-time high of $147 per barrel in July 2008, but that obviously hasn’t kept gas prices from rising above $4 in most areas.

Hopefully, we’ll see some price relief down the road, but given historical patterns we may not get much help over the next 3 to 4 months.

April Market Recap

April was a good month for the investment markets, with the S&P 500 rising 2.85% to close at its highest levels of 2011.  We’re having a good year so far in 2011, but it has not necessarily been a smooth ride.  The S&P 500 previously peaked on Feb. 18, only to lose 6.86% over the next month.  However, the market has since performed well to gain 8.49% since March’s trough.

You will notice that your respective accounts are currently trading at or near their high points for the year.  I am currently over-weighting most portfolios in commodities and other asset classes that figure to capitalize on a continuously declining U.S. dollar, while I have largely moved away from “high-quality” bonds, such as U.S. Treasuries and highly rated corporate bonds. 

The market is currently overbought, which means that the statistical likelihood of a market pull-back is higher than in a normal market.  For those of you with more conservative investment allocations, I have already taken measures to protect your accounts in case of a pull-back.  However, just because we’re due for a pull-back doesn’t mean it will occur, which is why we still own equities, commodities and higher yielding corporate bonds, at least for now.