Third Quarter Market Review
The equity markets bottomed on March 9, 2009 and since then has been on a one way ride higher with seven consecutive months of gains. Here is a look at the first nine months of 2009 by the numbers.
Stock Market Benchmarks:
9/30/09 12/31/08 Return
- Dow Jones Industrial Average 9.712 8,776 10.7%
- S & P 500 1,057 903 17.1%
- S & P 400 Mid Cap 691 538 28.4%
- NASDAQ 2,118 1,577 34.3%
- Dow Jones Utilities 377 371 1.6%
- NYSE Financial 4,928 3,848 28.1%
- NYSE Energy 10,866 9,434 15.2%
- BBG Reit 135 120 12.5%
Some observations from the first nine months of the year: smaller capitalization companies outperformed larger companies by a large margin, the typical defensive sectors were the under performers - utilities, energy, and real estate, the financial sector which was on the ropes a year ago has made a dramatic rebound from the lows, and commodity prices were generally higher. The third quarter was the best performing quarter for equities since 1998.
Key Bond Rates: 9/30/09 12/31/08 Change
- U.S. 3-Month T-Bill 0.10% 0.09% +0.01
- 2-Year U.S. Treasury 0.94% 0.77% +0.17
- 10-Year U.S. Treasury 3.31% 2.25% +1.06
- 30-Year U.S. Treasury 4.05% 2.68% +1.37
- 30-Year Fixed Mortgage 5.16% 5.14% +0.02
- BBG Investment Grade Corp 5.06% 6.17% -1.11
- BBG High Yield Corp Bond 10.26% 16.72% -6.46
The fixed income market had mixed results in the first nine months of 2009. U.S. Treasury securities were the worst performing sector within the fixed income market as interest rates on longer maturity bonds moved higher, driving prices lower. Specifically, Treasuries investors are concerned about the massive amount of new supply coming to market as the government continues to spend and expand deficits. Mortgage-backed securities performed better than Treasuries as mortgage rates are basically unchanged for the year to date period. The corporate bond sector, both the investment grade corporate bond and high yield sections produced positive returns in the first half as corporate bonds rates there actually declined as risk premiums tightened. The total returns from the high yield sector up an amazing 48.5% this year as measured by the Merrill Lynch High Yield Index.
With the market rally, this is the perfect time to review your portfolio, access your portfolio’s risk level and check to see if it is in line with your personal risk tolerance level. After September and October of 2008, we all have a better understanding of risk and the importance of diversification.