Market Commentary 3.31.09

Dan Greenhaus writes:

How quickly things change.  Late last week, I sent out a note detailing how March 2009 was shaping up to be one of the best months for the S&P dating back to 1950.  However, after two down days (on low volume), the S&P now finds itself up “only” 7.13% for the month which would *not* make it one of the 20 best months.  However, with futures trading higher this morning, perhaps we can get the index up into that admittedly-arbitrarily-numbered-group because the monthly performance following those months has historically been quite good.  We’ll have to wait until 4 PM to know for sure.  At the same time, we know March is going to be an up month of some amount which would make this the first up month since December but more importantly, it will be the first up month of more than 1.25% since April 2008 when the S&P was up 4.75%.  Since then, only May, August and December were positive months and each of those months saw gains that were anemic at best, especially considering the force of the declines. 
 
That said, the start to this week is jeopardizing the index’s chance of building on the gains seen over the last three weeks.  The S&P gained approximately 19.40% over the preceding three weeks and with yesterday’s large decline, I’m not sure we can put together the first four consecutive weeks of gains since September and October of 2007.  That’s right; we did not have four consecutive up weeks for the entirety of 2008.  Additionally, the S&P is on pace for its sixth consecutive quarter of losses.  This would match the longest streak dating back to 1950.  From the first quarter of 1969 until the summer of 1970, the S&P was also down for six quarters when it lost about 30%.
 
All around the world
 
With foreign markets mixed this morning, there are quite a few things worth mentioning around the world.  Beginning in Japan where the Nikkei was down just about 1.5%, the unemployment rate rose to 4.4% while the ratio of jobs for each applicant, yes they keep track of this, saw the biggest drop since 1974.  Its pretty clear at this point that Japan is going to be moving forward with another stimulus, probably 10 trillion Yen’s worth.  However, and we know this all too well, Japan has repeatedly tried to stimulate their way out of problems before to no avail.  In fact, going way back to the beginning of their lost decade, Japan embarked on no less than three stimulus packages by September 1993 the combination of which amounted to about 6% of their GDP.  What has all these stimulus packages gotten them?  The OECD is out with a report that says Japan’s public sector debt is going to approach 200% of GDP by the end of next year.  As a frame of reference, here in the US our public sector debt has been about 40% of GDP and is expected to hit about 70% after all our packages.  To be clear, that’s not a healthy level and I don’t mean to suggest we’re a-okay because we’re not at 200%.  I was pointing it out for the reverse; to demonstrate exactly how bad the situation is in Japan.
 
Over in Europe, there are a few things going on.  To begin with, German unemployment rose again, the fifth month it has done so, coming in at 8.1%.  In the UK, consumer confidence hit the highest level since May as respondents indicated lower interest rates are helping.  In company specific news, Marks & Spencer reported sales that were higher than expected, bucking the trend we’ve seen throughout Europe.  At the same time, sales aren’t going “well” per se, they just weren’t as bad as expected.  Eurozone inflation was quite modest and with the ECB set to meet later this week, I would expect yet another rate cut is all but assured in order to help the struggling economy.