For the week of September 22, 2008
Following two weeks of unprecedented change, Wall Street continued to recover Friday on news that the
government plans to assist banks and money market funds. The Dow collectively gained about 780
points Thursday and Friday but still closed the week down 0.27 percent to 11,388.44. The S&P added
0.30 percent to end the week at 1,255.08, and the NASDAQ climbed 0.56 percent to finish the week at
Source: Morningstar.com. * 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.
On Hold – On Tuesday, Sept. 16, the Federal Reserve voted unanimously to leave short-term interest
rates unchanged at 2 percent, despite the Dow dropping 504 points the day before. Also on Tuesday,
the Federal Reserve Bank of New York made an additional $70 billion available to banks. Although the
Fed continued to pump cash into the financial system throughout the week, many economists expect a
Fed rate cut in the future, possibly before its next regularly scheduled meeting.
Energy Ease – Consumer prices dropped 0.1 percent in August, lead by a 3.1 percent decline in
energy prices – the biggest single-month decrease in nearly two years. The decline follows overall price
increases in June and July.
Asset Stats – An estimated 2.7 million U.S. taxpayers have gross assets worth at least $1.5 million. Of
that group, 357,000 taxpayers have assets worth $5 million or more (Source: Internal Revenue Service,
Where Credit Is Due – Nearly all of the 3.3 percent growth in the U.S. economy reported for the second
quarter 2008 (i.e., quarter-over-quarter growth rate expressed as an annualized total) was attributable to
the surge in our nation’s trade numbers. Net exports sold to foreign buyers accounted for 3.1 percent of
the 3.3 percent growth rate, i.e., 94 percent of the growth reported was directly tied back to our rising
exports (Source: Commerce Department, AP, BTN Research).
Storms & Stocks – Hurricane Katrina struck land on Monday, Aug. 29, 2005, a week before Labor Day
three years ago. Hurricane Gustav struck land on Labor Day Monday, Sept. 1, 2008. In the month
following Katrina, the S&P 500 gained 1.5 percent (total return). In the three months following Katrina, the
S&P 500 gained 4.3 percent (Source: BTN Research).
WEEKLY FOCUS – Keeping Perspective
The volatility of the market is causing concerns for many
investors. Fueling that volatility are continuous headlines
about how economic uncertainty is driving recent stock
market activities. These uncertain times can be
challenging, even to experienced investors.
It can be difficult not to get emotional in this kind of
market and to balance your anxiety with reason. Bear
markets can tend to over-correct and undervalue
stocks because of investor fear, in the same way that
stocks, in the final stage of bull markets, can become
overvalued. One of the worst things to do is essentially
buy high, sell low. Selling out at some of today's lows
and putting the cash someplace equivalent to the
mattress in the bedroom is not what you want to do. It's important to get past those basic emotions and
stay focused on long-term results.
One way to keep market activities in perspective is to remember that corrections, and recoveries, are
normal parts of economic cycles. While not a guarantee of future results, history has shown time and
again, that in the long run, traditional asset classes, such as stocks, bonds and bills, have all grown. It's
important to note however, that some of what we're seeing right now is unprecedented. But again, the
market will get through this.
Having a historical perspective and a sound financial strategy can help provide the sense of security and
confidence to stay-the-course, even in today's market volatility, to ultimately achieve your investing goals.
If you have any concerns, don't hesitate to call my office to set up an appointment for a thorough review of
your portfolio. That way, you can be more confident about your decisions.
* 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. Written by Securities America. SAI# 287565
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