The domestic stock market, as measured by the S&P 500, posted a lackluster return for the quarter, but it achieved that return in spectacular fashion. At the mid-point of the quarter, roughly 10 days after the Presidential election, the market was down 6%. The market rallied from that point forward—capped off by a strong closing kick on New Year’s Eve fueled by rumors of a compromise on the Fiscal Cliff negotiations in Washington. Ironically, it was Apple, a stock that was up 65% over the first nine months of the year, which dragged the index returns down for the quarter.

US Equity Markets Down More Than 2%

U.S. Overview

Economy
At the beginning of this year we made the following statement with regard to the domestic economy: “We expect 2012 to be very similar to 2011. The economy might be able to ride the recent momentum for another quarter, but lacking a resolution to some of these headwinds we suspect the middle quarters will be sluggish. The fourth quarter should see an improvement in growth and employment as the November elections bring renewed hope for the economy.” We’re pretty comfortable standing by that statement.

Over this past weekend the Spanish government secured $125 billion in bailout funds (Prime Minister Mariano Rajoy prefers to call it a line of credit) to secure the Spanish banks. The goal was to “ring fence” the banks from any further runs, particularly in light of this Sunday’s Greek elections which could determine the fate of Greece’s future in the euro. The immediate reaction by the markets was quite positive. S&P 500 futures contracts were up 1.5% when the Japanese market opened last night; Asian and European markets were up roughly 2%.