Weekly Update – April 6, 2012

It was a rough start to the second quarter of 2012 as three straight days of losses, ending in Thursday’s 15-point decline, cost the Dow 152 points, or 1.2%.  It was the Dow’s largest weekly decline so far this year.

European debt concerns were back in the spotlight, as worries related to Spain’s economy dragged markets downward.  A lackluster Spanish bond auction on Wednesday followed by comments from Spain’s Prime Minister that the economy is in “extreme difficulty” raised concerns that Spain may eventually need international aid.  This is particularly concerning as Spain is one of the Eurozone’s largest economies, much larger than Greece or Portugal.  As Spain continues to implement budget cuts and other growth-hampering (but necessary) austerity measures, the state of its economy will have to be closely monitored.

In the U.S., comments released by the Fed on Tuesday that another round of economic stimulus was not imminent tempered enthusiasm.  Not even a jobless claims number of 357,000 – the lowest number in four years – could reverse sentiment.  Jobless claims have now been under 400,000 for 24 straight weeks, with the peak being 667,000 in March of 2009.  Positive retail sales reports from major retailers helped limit losses on Thursday.

In the first quarter of 2012, our trust preferred portfolios returned almost 10%, on average, beating the Dow by approximately 2%, and other fixed-income measures such as the Barclays Aggregate Bond Index by almost 10% and the Dow Jones Corporate Bond Index by approximately 7%.  We expect trust preferreds to continue to produce compelling returns in this uncertain economic environment.

Tomorrow’s March employment report will set the tone for the market when trading resumes on Monday.  The number of jobs created in March is forecast to increase from February, dropping the unemployment rate from 8.3% to 8.2%.  Looking into next week, economic releases of note include initial jobless claims on Thursday and inflation data on Thursday and Friday.  Expect initial jobless claims to report in the 355,000 to 360,000 range and for inflation to remain in check.

In observance of Good Friday, stock markets and our offices will be closed tomorrow, Friday, April 6^th.

Have a good weekend,

James Skjong