Treasury bond rates were also unchanged(rising then falling with a renewal of moneyflow into bonds).
It was a strong month for precious metalsand commodities as gold and oil increasedover 5% and silver put in another spectacu-lar performance, gaining over 20% for themonth.Economic Outlook Despite improving consumer confidence andmanufacturing indices, the economic outlook in the U.S. continues to look challenged on thelarger issues of unemployment and housing. Ifear an even larger train coming down thetrack with layoffs at state and local levels,budget reductions at the federal level, increas-ing gas prices and the wind down of QE2, notto mention austerity measures in Europe andinflation in Latin America and Asia.
Stock Market Commentary
March 9, 2011
Lane Asset Management
While I would not sug-gest we are about to ex-perience a second reces-sion, and while I do rec-ognize the improvementthat has been occurringin corporate profits andrevenues, I believe therisks to the market areoverwhelmingly to thedownside.This would be a goodtime to avoid taking onadditional investmentrisk. More conservativeinvestors should consider raising cash levels,though I would do so in ameasured way as long asthe underlying perform-ance trend remains posi-tive.As always, I welcomeyour comments and sug-gestions.
Investment Outlook Following almost straight up performance sincelast September, not only is the market due for a correction, but economic headwinds and geo-political challenges in the Mideast and else-where present a difficult outlook for most in-vestment sectors. Accordingly, I recommendheightened caution for risk-taking.On the plus side, I would focus on the highestquality dividend-paying equities and sectorsthat will benefit from global tensions, flight toquality, and weakening currencies, such as en-ergy and other commodities, precious metalsand securities that benefit from rising interestrates. Even here, I would be mindful of the po-tential for profit-taking as many of these areashave run up in price.For the more conservative investor, I would beraising cash and examining option strategiesthat will help control downside risk.For taxable portfolios, I would also give consid-eration to a well-diversified municipal bondportfolio. State and local governments are inthe midst of dealing with large budgetary is-sues. Unlike the Federal government, however,
they can’t print money or operate at a deficit.
While defaults may increase, I suspect this issueis overblown and the local governments willwork their way out of the problem over timeeven if they have to do painful cuts along theway. With current tax free yields at 4% or more, and with bond prices depressed, an allo-cation to municipal bonds may prove timely.