March 30, 2012: U.S. Stocks Have The Best First Quarter Since 1998, Personal Incomes, Consumer Spending and Sentiment Rise:
The U.S. stock market is roaring. The U.S. major averages rose over 19 percent in the first quarter of 2012 which is the best performance since 1998. Technology had the best first three months of the year and we have been watching tech stocks carefully since August 2011. Today, stocks rose slightly with the Dow Jones Industrial Average closing the day up 66 points at 13,212. Data this week was more positive than mixed except for some new information related to housing.
Personal spending increased to the highest levels since July 2011 and rose 0.8% last month. Incomes rose by 0.2% and the data shows consumers aren’t afraid to spend money when they get more of it. Higher income elasticity will be important for increasing aggregate demand as the recovery strengthens.
U.S. Consumer Confidence March 2012 Rises
The Thomson Reuters/University of Michigan’s consumer sentiment index increased to 76.2, from 75.3 last month. The increase in consumer sentiment was the highest since February 2011 and was higher than economist expectations surveyed by Bloomberg. A reading higher than 50 suggests the economy is expanding and the March consumer confidence increase was the seventh consecutive rise in a row.
The market shrugged off the economic data as traders and investors kept gains from early in the year. If the market is expected to go higher, portfolio managers, hedge funds and traders will need to show they participated, which will make next week’s trading important. At the moment, we believe stocks are still cheap but we are watching the market carefully from a technical perspective. The economic data trends won’t reverse like the last 2 years and old winners won’t keep up with tech and small caps if investor sentiment also increases.