Before reading this update please grab your pen and paper and jot down:
Tuesday, August 28th, 9:30 a.m.
A few minutes early call: 888-214-7806 and enter pass code 983909.
I am hosting a live conference call to update you on the current market situation. The call will only be 20 – 30 minutes and packed with good information. I have arranged Kunal Kapoor, President of Morningstar Managed Portfolios, to be our guest speaker. This is an awesome opportunity to hear from a well respected expert. Please feel free to invite friends, colleagues and family members to join us on the call…some folks are even putting us on speaker phone at their place of work so everyone can hear! Confirmation of your attendance is appreciated but not required. Seating is unlimited. Call Cindy at 419-2271 with any questions.
If this time is not convenient, the call will be recorded and available 24 hours a day. Simply contact Cindy at 585-419-2271 anytime after 10:30 a.m. on that day and she will give you either a URL link (to listen via computer) or the new phone number.
Mid Year Market Update (written in July)
The first six months of 2007 produced very good gains for equities. The stock market got off to a fast start but then hit a speed bump in February amid concerns of a meltdown in the subprime mortgage market. Subprime mortgages are loans given to less creditworthy consumers whose credit score is under 620. That weakness was short-lived as solid earnings growth and robust merger and acquisition activity lifted stock prices higher. However, the concerns about the potential ripple effect of subprime mortgage losses on the financial markets kept things in check.
Winners
The broad domestic equity market, as measured by the Russell 3000 Index, delivered a solid gain of 7.11% in the first half. While it may be a little early to call a rotation in market leadership, growth-oriented stocks appear to be perking up. The Russell 3000 Growth Index gained 8.22% through June, while the Russell 3000 Value Index returned 6.01%.
International stocks fared better than their domestic counterparts during the six-month period thanks to a weakening dollar and strong growth in many overseas economies. The MSCI World ex-U.S. Index returned 9.38% in local currency terms and 11.27% in dollar terms.
Losers
The NAREIT REIT Index, representing real estate investment trusts, tumbled more than 8% during the second quarter, resulting in a 4.95% decline through the first six months of 2007. This is no big surprise as the valuations among U.S. REITs were a bit lofty due for a correction. Bond prices also came under pressure in recent months. The Lehman Aggregate was up 0.97% through June, despite a -0.52% decline in the second quarter. High yield was one of the stronger sectors with the Merrill Lynch High Yield Index up 2.97% while the Lehman 1-10 Muni Index had a meager 0.62% gain through June.
Overseas central banks are in tightening mode reflecting strong global economic growth and inflation concerns. As a result, investors who began the year expecting a Fed ease by mid-year gradually altered their outlook to a Fed on hold in 2007 and lately have started factoring in the potential for a rate hike. The yield on the 10-year note rose from 4.7% at the end of 2006 to a high of 5.25% in June.
Given the current state of our economy, domestically and globally, we still remain optimistic. Nonetheless, we don’t expect double digit returns for the second half of this year. We expect single digit percentage growth for the rest of 2007.
Source: Data used in this report was provided by independent sources and is for information purposes only. Past performance is no guarantee of future return. The views expressed are an appraisal of the current environment and possible events. Consult your financial advisor before investing.
Your experience will differ from the performance of specific asset types to the extent that several types may exist in your account and to the extent that your specific investments perform differently than the average of that asset type. Whether any of the asset types mentioned above are suitable for your account must be determined individually, and your portfolio may not contain some of the asset types described.
The market indices discussed are unmanaged. It is not possible to invest directly in an index.
Personal update
Summer 2007 has been great at the Colgan household…but also exhausting. This month’s feature picture is Christopher in his crib. After playing hard outside I put him down for a nap but he demanded I put his “big wheels” book in the crib with him. When I checked on his later I discovered that he had opened the book to read it to himself and fell sound asleep with exhaustion. What a great age!
