Monthly Economic Update February 2011


February Summary
Earnings reports and economic progress enabled continuation of positive capital market momentum for much of February. Prior to backing off near month-end, the S&P 500 had more than doubled from the March 2009 bottom and was up nearly 30% from the lows of late August. Year-to-date, 2011 has registered the strongest annual start to the stock market since 1998.

Gross domestic product hit a new record in the fourth quarter of 2010, manufacturing activity is at the highest level since 2004, and other economic metrics such as initial jobless claims and consumer confidence are showing progress, albeit modest, after stalling in prior months.

Economic and geopolitical challenges remain. The domestic economy is saddled with stubbornly high unemployment, a damaged housing market, and fragile government finances. Expansionary policy measures are in no small part providing the foundation to much of the positive economic progress previously discussed. Globally, inflationary concerns are ramping in both developing and developed economies. China, India, and other developing economies are actively battling inflationary pressures while policymakers from the UK and euro zone are expected to follow suit in the near future. These actions pose challenges to global economic growth.

Civil unrest and violence in the Mideast and North Africa accelerated throughout February with contagion engulfing an increasing number of countries. Owing to the region’s concentration of oil reserves and output, disruption has driven a spike in oil prices as well as intermittent flights to traditional safe havens such as gold, the dollar, and U.S. Treasury securities. Risk assets, such as equities, have also responded by declining from higher levels set earlier in the month. We are clearly in the early innings regarding this unrest, which continues to spread. Capital market volatility and headline risk will be heightened going forward.


February’s Economic Releases

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Market Returns
The S&P 500 index gained 3.4% for the month and is now up 5.9% for the year. Developed international equity markets, as defined by the MSCI EAFE Developed Markets index, were up 3.3% for the month. Emerging markets continued to be challenged this year with the MSCI Emerging Markets index declining 0.9% for the month. Year-to-date, international developed and emerging markets returned 5.7% and (3.6%), respectively.

In the fixed income market, the Barclays US Aggregate index was up 0.3% for the month and the 10-year U.S. Treasury bond ended with a yield of 3.42%, no change for the month and up slightly for the year. For the year, the Barclays U.S. Aggregate has gained 0.4%. On a global basis, bonds were up 0.6% for the month and 0.8% for the year.

Commodities and real estate (publicly traded REITs) posted gains of 1.3% and 4.6% respectively.


Disclaimers
This market commentary was produced by Summit Financial Resources, Inc., 4 Campus Drive, Parsippany, NJ 07054. Tel: 973-285-3600, Fax: 973-285-3666. Source of performance: Morningstar®. Indices are unmanaged and cannot be invested into directly. The investment and market data contained in this newsletter is not an offer to sell or purchase any security or commodity. Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The MSCI EAFE and Emerging Markets Indexes were created by Morgan Stanley Capital International (MSCI) and designed to measure equity market performance in global developed and emerging markets, respectively. The Barclays Aggregate Bond Index is a market capitalization-weighted index comprised of government securities, mortgagebacked securities, asset-backed securities, corporate securities, and a small number of foreign bonds traded in the U.S. It is used to represent the universe of bonds in the domestic market. REITs, Real Estate Investment Trusts, are securities that invest in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, however, have liquidity constraints. Past performance does not guarantee future results. Information throughout this Newsletter, whether stock quotes, charts, articles, or any other statement or statements regarding markets or other financial information, are obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. To unsubscribe from this investment newsletter please reply to this email with “unsubscribe” in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision. with “unsubscribe” in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision.

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