Weekly Market Commentary March 18, 2013

The Markets Like winded runners, stock markets slowed at the end of last week. Since the start of the year, the Dow Jones Industrials Index has risen by almost 11 percent, hurdling past new highs several times. The S&P 500 Index gained 9.4 percent over the same period. The index moved higher in 10 of the past 11 weeks and finished last week just shy of its all-time high. However, the Dow and the S& Ps momentum and that of some other U.S. stock markets slowed on Friday as stronger economic data was offset by an unexpected slump in consumer sentiment. Economists expected the Thomson Reuters/University of Michigan consumer sentiment index which gauges Americans feelings about their current financial health, the health of the economy over the shorter-term, and growth prospects for the economy over the longer-term to move higher in March. Instead, the index fell from 77.6 to 71.8, reaching its lowest level since December 2011. Markets fell on the news even though the negative results contradicted those of other consumer confidence measures, such as Bloombergs Consumer Comfort Index which has moved higher for six consecutive weeks. The consumer sentiment surprise also pushed Treasury yields down. Yields on benchmark 10-year Treasury notes fell to 2 percent. The Treasury market remains concerned that stronger economic data could lead the Federal Reserve to change its policy on quantitative easing. The Federal Reserves next Open Market Committee meeting is next week, and may provide further insight to the matter.
Data as of 3/15/13 Standard & Poor's 500 (Domestic Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index 1-Week 0.6% 2.0 0.9 0.8 0.5 Y-T-D 9.4% N/A -5.8 -0.5 6.7 1-Year 11.3% 2.3 -3.2 -5.0 17.6 3-Year 10.7% 3.7 13.1 1.8 17.8 5-Year 4.1% 3.3 9.6 -7.7 8.0 10-Year 6.1% 3.8 16.7 1.7 12.6

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barrons, djindexes.com, Lon don Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

THE MIDDLE CLASS IS GROWING. In the United States, households that earn between $35,600 a year and $94,600 a year are considered to be middle class. Thats about 40 percent of U.S. households (another 40 percent earn less than the middle class and 20 percent earn more). Scholars and pundits have noted that job insecurity and stagnant income levels have weakened the middle class in the United States during the past few years, but thats not whats happening in the rest of the world. The global middle class has been growing and is expected to continue to grow over the next few decades. The Organization for Economic Development defines the global middle class as including people earning between $10 and $100 a day with purchasing power parity. (Purchasing power parity is the theory that currency exchange rates should adjust so the same goods cost the same in different countries. Its what the Big Mac Index measures.) By 2030, according to Ernst & Young, the global middle class is expected to more than double, adding three billion new members. These up-and-comers primarily will live and work in rapidly-growing countries. As the global middle class grows so should its spending power. Between 2011 and 2030, middle class demand for goods and services is expected to increase from $21 trillion to $56 trillion. Forty percent of that spending will be done by the burgeoning middle class in Asia, including China and India. According to Forbes, these consumers are creating demand for all kinds of goods and services including cosmetics, automobiles, cell phone minutes, personal banking, and retirement planning. For many decades, consumer spending has been an important driver behind economic growth in the United States. Its likely to play a significant role in the economic growth of emerging countries, too. As developing countries become developed countries, interesting opportunities for investment are likely to emerge. Weekly Focus Think About It A man who carries a cat by the tail learns something he can learn in no other way. --Mark Twain, American author and humorist Best regards, Steve

Steve Gierl Gierl Augustine Investment Management, Inc. 344 N. Pike Road Sarver, PA 16055 724-353-1800 877-979-1800 Fax number 724-353-1832 We appreciate it when you refer our business to others and invite you to forward your email to 1 or 2 other people who might find the content interesting.

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