US stocks fell 3.6% in January, gained 6.0% in February, fell 1.9% in March for a net gain of 0.3% on the year. The dollar gained 9% YTD relative to the Euro, on top of last year's 13% rise, but stabilized in recent days. Crude oil bottomed around $46 in February, traded in a range of $45-55/barrel in recent weeks.
The jobs report on April 3rd surprised to the downside - adding only 126K jobs versus expectations of 244K. The US unemployment rate remained at 5.5%, the lowest level in 6 years, but annualized jobs growth of around 2 million/year barely keeps up with growth in the work force from demography and immigration. Labor participation rates are still quite low, which keeps down wages (good news for inflation) but also keeps down consumer spending (bad for business.)
We expected an increase in consumer spending given that the drop in gasoline prices adds $750/year to the average family budget. Consumers remain cautious given wages only grew 2.1% over the last year. Perhaps a sign of change - McDonalds and Walmart recently raised employee salaries by an average of $1/hour and introduced new benefits.
All eyes still on the Federal Reserve, which keeps hinting about higher rates, but has yet to take action. Gains in the dollar were driven by expectations of stronger economic growth and higher interest rates in the United States. Oil supplies are inflated worldwide as producers keep producing despite lowered demand. US corporate earnings are under pressure as the strong dollar hurts overseas sales, while US consumers rotate to cheaper imports.
In world affairs, not much progress on many fronts - ISIS still fiercely defending gains in Iraq and Syria, Russia still saber rattling in the Ukraine, Iran still intransigent over nuclear arms negotiations, most of the Arab world still in turmoil, Greece and Germany still negotiating over debt resolution.
In the United States, total gridlock in Congress not likely to ease until after the 2016 presidential election. So many important issues to address, yet politicians unable to form common ground within parties, let alone across party lines.
All in, no surprise that stocks can't advance, especially after the 49% gains of the previous two years. The better news is that stocks haven't declined sharply either, though day by day volatility is higher this year than in recent years. For the time being, our clients will simply collect dividends and interest, while we wait for significant news to develop that would drive prices more emphatically in a new direction.