Market Commentary
For the week of May 19, 2008

The Market
Rising oil prices gave energy stocks a boost last week, as prices in New York set a record high above
$126. Housing starts surprised Wall Street with a gain of 8.2 percent in April and with the first increase in
building permits in five months, according to the Commerce Department. Most of the housing activity
came from multifamily buildings. A 28-year low in the consumer confidence index failed to dampen the
markets, as the S&P had its best weekly percentage gain in a month – 2.74 percent to close the week at
1,425.35. In light trading, the Dow gained 2.02 percent to end the week at 12,986.80 and the NASDAQ
rose 3.41 percent to finish the week at 2,528.85.

Source: * Past performance is no guarantee of future results. Indexes are unmanaged and
cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week”
returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.

Less Inflation – The Labor Department reported last week that the Consumer Price Index (CPI) rose
0.2 percent in April, short of the 0.3 percent that economists had expected. The CPI was up 0.3 percent
in March. The core CPI, which excludes food and energy prices due to their higher volatility, rose 0.1
percent; analysts had anticipated a 0.2 percent increase. April prices overall were 3.9 percent higher
than a year ago, compared to 4 percent higher in March, an indication that
inflation may be easing.

Supply and Demand for Colleges – A record number of high school seniors will graduate (3.3 million)
from public and private high schools in the next couple of months. This year’s total is an increase of
287,000 from 5 years ago and 599,000 more than 10 years ago (Source: National Center for Education
Statistics, BTN Research).  

So What Would You Call Yourself – Nineteen percent of Americans with at least $1 million of
investable assets (i.e., not including the value of their home equity) do not consider themselves to be
wealthy (Source: Fidelity Institutional Wealth Services, Rocky Mountain News, BTN Research).  

In and Out of Favor – The growth stocks in the S&P 500 outperformed the value stocks in the index for
the six consecutive years of 1994-99. Then for each of the next seven years (2000-06), the value stocks
in the index beat the growth stocks. Growth stocks came back in favor and outperformed value stocks in
calendar year 2007, a trend that has now continued for the first four months (January-April) of 2008. The
S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of
the U.S. stock market (Source: BTN Research).       

WEEKLY FOCUS – HSAs: Potential Health Care Safety Nets

The IRS recently released the 2009 tax-deduction limits
health savings accounts (HSAs). The deductions
limit for individuals rose from $2,900 to $3,000 and from
$5,800 to $5,950 for families. Those over age 55 can
make an extra $900 tax-deductible catch-up contribution
this year.

HSAs offer a way for individuals to bridge gaps in
health insurance coverage that may occur during times
of unemployment or in retirement. Anyone younger
than 65 who has purchased a qualified high-deductible
health insurance plan can create an
HSA. For 2009, to
be considered “qualified,” the insurance plan must have
a deductible of at least $1,150 for individuals or $2,300
for a family, and have a limit of $5,800 individual and $11,600 family for out-of-pocket expenses. For
2008, the minimum deductibles are $1,100 and $2,200, and the out-of-pocket limits are $5,600 for
individuals and $11,200 for families.

Many employers offer flexible spending accounts that allow employees to set aside pre-tax dollars for
medical expenses not covered by the company’s health insurance, including premiums and deductibles.
Unlike flexible spending accounts, however, HSA contributions and gains can be rolled from year to year,
and you retain ownership of the funds even if you terminate employment.

Because you establish an HSA independent of your employer, these accounts can provide a health care
expense “safety net” should you terminate employment (voluntarily or involuntarily). They also provide
retirees with another investment vehicle that offers tax deductions for contributions, tax-free growth and
tax-free withdrawals for medical expenses. Withdrawals for nonmedical expenses after age 65 are still
taxable, and a 10 percent penalty applies for nonmedical withdrawals before age 65.

Choosing a health insurance policy that qualifies can involve insurance and tax issues that should be
discussed with professionals in those fields. We can help you determine if an HSA is right for you and
which investments are most appropriate. Call our office for an appointment to discuss HSAs. If your
employer offers a flexible spending account, be sure to bring a description of the account requirements
and restrictions.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of
the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded
blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter
common stocks traded on the National Association of Securities Dealers Automated Quotation System. The
Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely
recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies
representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. WMCSAI #277680
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Returns through 5/16/08
1 Week  
Dow Jones Industrials  
NASDAQ Composite
S&P 500  
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