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Client
Communication Briefings Last
March I wrote that I believed that we were in the ninth inning of the bear
market and was hopeful that holding on for just a few more swings of the bat
would ultimately prove victorious. After a fairly substantial rally in the 2nd
quarter it would appear that the bears have called for extra innings. In
fact, the last week proved to be one of the most bearish we’ve experienced.
We are re-testing the lows we experienced last April in all three domestic
stock indices – Dow, S&P 500 and the NASDAQ. The
Federal Reserve has tried to stem the flow by dropping rates a total of six
times since January. But it really has been too little, too late -- the cuts
have had little affect on the market so far. The Fed’s earlier aggressive
rate hikes was the precipitating cause of the
economic malaise we are experiencing. It is no wonder Chairman Greenspan is
slow to cut rates – no one finds it easy to accept an error. Eventually the
Fed’s current actions will take hold and get the economy growing again. Investors
continue to be skeptical, the high tech boom has gone bust, capital
investments are down, the manufacturing sector continues to ail, producing layoff in numbers we haven’t seen since the
early 1990s. While another rate cut is anticipated in October, President Bush
is calling for action sooner rather than later. An interim cut is more likely
now and may help to bolster consumer confidence, which is also weakening in
light of rising unemployment figures. This past week we saw that number climb
to 4.9%, which is the highest it’s been since 1996 and .3% higher than
projected, which caused the market to tumble late in the week. The
overall tone remains negative, however, there are
some bright spots. Tax rebate checks are being sent – giving consumers some
liquidity, companies are taking aggressive actions to reduce costs and boost
shareholder faith, an interim cut is expected, the government has opted not
to try to break up Microsoft, and certain sectors continue to perform
strongly despite the anemic condition of the US economy. I
have no doubt that you are feeling anxious and perhaps fearful about the
state of your own investments. As I have said in the past, fear is a natural
and often healthy mechanism. The trick is to be certain to respond prudently
to that fear rather than reactively. The prudent response right now is to
stay watchful while the big hitters sweat it out on the playing field. It’s
always hard to sit on the bench, especially when you feel like your team is
losing. Amid your fear and concern for your own assets, rest assured that FSG
is also being diligently watchful and taking appropriate measures to preserve
and protect your investments as best we are able in these conditions. We
are also working with a newly devised advisory board and consultants from
various disciplines to help ensure that we continue to provide value-added
services to you. In the coming months watch for additional information on our
services as well as a client satisfaction survey. We are interested in your
feedback so we can continue to best serve your needs. As
always, please call with any questions or concerns you may have. I appreciate
how difficult these conditions continue to be, but I also know that eventually
this game will end and a new, healthier season will open. Sincerely, Michael
P. Haubrich, CFP |