It’s done! It’s done? It’s done. We aren’t quite sure how to best characterize the completion of the Greek debt restructuring, but we’re relieved that it is at least temporarily over. In present value terms existing holders of Greek debt took approximately 75% losses on their bonds. The goal was to get bondholders to agree to the losses in the hopes of avoiding a technical default. Unfortunately, the International Swaps and Derivatives Association has deemed this to be an actual default. The importance of that detail is that it reassures the bond vigilantes that buying credit insurance through credit default swaps as a viable way to renew upward pressure on Portuguese, Spanish, Irish and Italian bond yields. In other words, this is just the end of Act One in what could be a 5-6 Act play.

The other big news today was the February jobs report—the economy added 227,000 jobs in February. Over the past six months the economy has added 1.2 million jobs, the strongest 6-month employment growth we’ve seen in the past six years. At the end of the day, domestic employment growth rather than the ongoing European saga is what the equity market seems to care most about—coinciding with the strong employment data over the past six months, the domestic equity market has advanced more than 21%. Despite our cautionary pleas over that stretch, our clients’ portfolios have participated fully in this strong move higher—in fact, most have outperformed appropriate market benchmarks by 2-3%. While we reduced some of our traditional equity risk exposures we offset that with a modest increase in our non-traditional (and less correlated) exposures—the net result was lower volatility and higher returns for the period.

Today also marks the three year anniversary of the market lows of the Great Recession. The S&P 500 closed at 676 on 3/9/09—as of this writing it stands at 1374, more than twice the level of three years ago and less than 200 points (another 14%) away from its all-time high. When we think of the markets in that context it does tend to renew our cautionary concerns. We aren’t surprised by the recovery from the 2009 lows, but we are surprised at our nearness to the historic highs. Things are definitely better than when we were at the nadir but this certainly is not what we expected the zenith to look like. The domestic economy still has an 8.3% unemployment rate; China lowered its growth target below 8% for the first time in 7 years; Europe is in a recession; household balance sheets remain over-levered; and, the Iranian nuclear situation could keep pump prices above $4/gallon for some time to come. We’re pleased with the market’s performance over the past 6 months but we’re inclined to take some profits at these levels.

Jim Robinson CEO & CIO—Telemus Capital Partners

Disclaimer And Disclosure

This report is provided for informational purposes only, and does not constitute any offer or solicitation to buy or sell any security discussed herein. All opinions expressed and data provided herein are subject to change without notice. All investments involve different degrees of risk. You should be aware of your risk tolerance level and financial situations at all times. Past performance does not guarantee future results.