How Did Markets Fare in Q1 2011?

What did the quarterly review say?

Japan’s nuclear crisis and Libya dominated the macro picture; the earthquake badly hit Japan’s growth outlook but not the ongoing global recovery — the biggest impact was supply-chain disruption, fixable near-term. Worsening nuclear risk was markets’ biggest fear; Middle East protests faded under crackdowns in Libya, Bahrain and Syria while the UN’s Libya no-fly zone raised the spectre of another Western Middle East war; oil kept its risk premium and risk assets stayed volatile.

How did markets react?

The quake slammed markets: developed equities dumped, US Treasuries surged — in March’s first two weeks the US fell over 5%, Europe nearly 8%, Japan over 13%; emerging markets were less hit. Gloom was brief; refocus on recovery drove a strong second-half rebound. Ten-year Treasury yields peaked at 3.74% in early February, sank to 3.17% mid-March on safe-haven flows, then recovered. The yen hit a record high post-quake before G7 joint intervention steadied the dollar.

What’s the lesson for workers?

Don’t churn your mix on short-term shocks; long-term diversification wins — at MPF fund comparison.