INVESTMENT OUTLOOK JUNE 2003

The S&P 500 bottomed in early March, 25 points above the October low of 775. Once the war concerns became a reality, stocks began a substantial advance, reaching 18% in the S&P 500 as of this writing in late May. For stocks to do well after a peak in interest rate spreads between low and high quality credits is not unusual. Once spreads have begun to narrow, the median gain for the S&P 500, considering the last fifty years, has been 18% in six months, 21% at nine months and 27% twelve months after the interest rate differential started to tighten. The uncertainty about Iraq...

ECONOMIC & INVESTMENT OUTLOOK FOR 2003

PROSPECTS FOR ECONOMIC GROWTH
The economic recovery is sustainable, although it has softened in recent months. The recovery has been weaker than average, but the recession was the shallowest and shortest on record. During 2001, the lone policy tool used to counteract the recession was monetary policy, given that the federal budget was in surplus and the dollar was strong. Policy makers previously had not dealt with such a speculative bubble-induced boom and recession. Presently, the total policy arsenal of the government is aimed toward spurring the economy, boding well for sustained growth. For example...

EQUITY PERFORMANCE
11/2002

A FRUSTRATING MARKET
The S&P 500 Index increased 5.88% in November 2002 after increasing 8.79% in October. The S&P 500 Index bottomed on October 9, 2002 at 776.76. By the end of November, it had increased 20.5% to 936.31. Work by Birinyi Associates showed that within the S&P 500 Index, the best performing strategies were price reversal (i.e. stocks that had declined the most up until 10/9, have had the best percentage gains since), high P/E, no yield, negative or low ROE, smaller companies and no earnings growth projected in 2003.

EQUITY PERFORMANCE
10/2002

AN UP MONTH!!!
The U.S. equity market moved sharply higher in October as the S&P 500 Index increased 8.79%. The Dow had its best month in the 15 years since January 1987, and put an end to six consecutive monthly declines. Good news included the fact that after six consecutive quarterly declines, corporate profits reversed direction and increased an estimated 6.7% in 3Q 2002. Also, company managements had guided earnings expectations down so far that 60% of the first 400 companies in the S&P 500 to report results were able to exceed the lower expectations.