The "fat lady is clearing her throat". The recent price gains in equities and commodities may soon have run their course on the psychological influences of rhetorical expectations of a global economic recovery. I fully expect her to break out into "song" in the near future and that could spell the end of the meteorical rise in prices for equities and commodities. One must assess the ramifications of inflationary price gains on the consuming public and widespread protests are reflecting that emotional discontent. One of the major considerations for our negativity remains the burgeoning unemployment situation, the home mortgage foreclosure problem and prospect of further bank failures. We strongly urge investors to implement hedging strategies. Now for some actual information.
Interest Rates: March treasury bonds closed at 11907, down 7 ticks as money moved from the relative safe haven of treasuries to equities. The financial recovery tied to the Bernanke quantitative easing program and the Federal Reserves $600 billion bond buying program had injected new optimism into the equity markets as well as positive corporate earnings results. We continue to suggest the sidelines in treasuries although some bond straddles may be worthwhile examining.
Stock Indices: The Dow Jones industrials closed at 12391.25, up 73.11, and its highest close since June of 2008 and up 0.96% for the week. The S&P 500 closed at 1343.01, up 2.58, doubling in price since its March 2009 low. The Nasdaq gained 2.37 points to close at 2833.95. The equity market gains were notwithstanding another round of tightening by China and the unrest in the Middle East. China increased its key reserve requirements for banks by another 50 basis points in order to try to control inflation. Earnings gains by software companies and others prompted the new round of buying on the assumption that the U.S. economic recovery was progressing albeit slower than the U.S. administration would like. We do not buy into that assumption and suggest strongly the implementation of hedging strategies.
Currencies: The March U.S. dollar index closed at 7766, down 40.5 points against sharp gains in the Euro of 80 points to 13681, the March swiss Franc 45 points to 10579, the March British pound 73 points to 16243, and the Japanese yen 32 points to 12032. The Canadian dollar tracked the U.S. currency losing 21 points to 10130 basis the March contract. The G20 are meeting in Paris to assess the financial crisis and try to establish goals. Fed Chairman Bernanke, in Paris Friday, continued to imply that China and other countries with large trade surpluses allow their currencies to climb to avert another financial crisis. We do not believe anything productive will emerge from the talks over the weekend and suggest the sidelines for now.