16 Apr 2012 Dodge & Cox - Q1 2011 Commentary ( Portfolio )
The S&P 500 had a strong first quarter, as investor optimism increased amid encouraging economic signs. Globally, concerns about the European sovereign debt crisis persist but have been ameliorated by recent policy decisions, including a debt restructuring deal for Greece, the European Central Bank’s Long-Term Refinancing Operation (LTRO), and the launch of the European Sovereign Bond Protection Facility. In the United States, the Federal Reserve announced the results of the most recent bank stress tests in March, with the majority of the largest U.S. banks meeting requirements for adequate capital. Unemployment has fallen slightly in 2012 to date. The Federal Reserve also renewed its commitment to keeping interest rates low, putting housing affordability at an all-time high and potentially supporting an improved housing market in 2012. Finally, the outlook for U.S. earnings continues to be positive, balance sheets remain strong, and dividends are rising.