In March, 2009 the S&P 500 dropped to its lowest level since the great depression. Many of us had never seen a market like this and were uncertain if we would recover. Others felt the decline was a correction that was “bound to happen.” The S&P dropped and we ended the first quarter of 2009 down 38%. Today the S&P has more than doubled since March of 2009. For the first quarter of 2012, the S&P 500 is up 12.6%.
The chart below shows the three month return ending March, 2009 and the annualized 3 year return ending March, 2012 for the four major asset classes and the market as represented by the S&P 500. This chart illustrates just how far we have come in the last three years.
Rushing to fixed income following March of 2009 seemed to be the best option for those with a short time horizon. However, those with a longer time horizon, who were able to ride out the storm would have been seeing sunny skies again. In the first three months of 2009 international stocks fell 46%. Buffeted by bad news regarding European debt, investors were uncertain. But, in the 3 years ending this March, international stocks have returned and are up 19.5%. Of the four asset classes analyzed, small cap stocks are on top this March, up 29.5% vs. 26.6% for large cap stocks.
While we have improved so much from where we started three years ago, consumers are not completely convinced. According to the Consumer Conference Board, consumer sentiment was off slightly in March. Consumer sentiment rose to 71.6 in February from 64.5 in December, but March reports a lower 70.2. Consumers are still optimistic in the long term. But, the short term outlook regarding current conditions is less favorable. “Despite the month’s dip in confidence, consumers feel the economy is not losing momentum.”