Q1 2012
Market Commentary - Don't Fight the Fed (Or Quantitative Easing)

So far, 2012 has exceeded expectations on several fronts. For the first quarter, the S&P 500 posted a total return of 12.6%, its best 1st quarter return since 1998. Likewise, the NASDAQ jumped 19% for the period, its fourth best performance in the first quarter in its history dating back to 1971. The Dow lagged the other two averages but still registered a strong 8.1% return. However, as if someone flipped a switch on January 1st, everything that was working in the fourth quarter of 2011 is now pulling up the rear and everything that was lagging is now leading the charge. The chart below illustrates the trend reversal.

This often happens in early January and is known as the “January Effect,” as investors look for bargains in beaten-down stocks. This trend stayed intact for the entire fi rst quarter, which is unusual. We believe that as the situation in Europe was at least temporarily “solved” and fi rst quarter economic numbers showed steady improvement, the “risk off” strategy of the fourth quarter became “risk on” for 2012 (thus far)........download the full commentary