Company's 401(k) Plan.
09 April 2010
Dear Friend:
Despite losses in late January and early February of 6.7% for the Dow Jones Industrial Average, 8.1% for the S&P 500, and 8.4% for the Nasdaq, all three indexes provided satisfying increases for the quarter (see the Market Review below). Also of note, the indexes are approaching the levels they held just before the Fall 2008 sell-off and have provided double digit increases in the 45% to 65% range for the past 12 month period. Please remember that past returns are no guarantee of future performance, but many of us invested in the market feel that it is OK to breathe normally now, in spite of the continuing volatility. Once again, the strategy of remaining fully invested in the market has provided access to market returns and has been a benefit to your portfolios.
So, what did the markets do last quarter?
Market Review
All three major indexes improved over the past quarter. The Dow Jones Industrial Average was up 4.11%, the S&P 500 up 4.87% and the NASDAQ Composite up 5.68% for the quarter. International indicators were mixed for the quarter measured in both US Dollars and local currencies with Finland leading the gains at 10.91% (US$) and Spain at -15.61% and Greece at -13.16% (both US$) leading the losses. During the quarter, the dollar gained ground against the Pound, Yen and Euro. The Federal Reserve Board maintained the Federal-funds target interest rate at a range of 0.25% to 0.00%. For the quarter, the Dow Jones Wilshire REIT Index increased 8.73% with a chart topping 104.67% gain for the past 12 months. The MSCI EAFE was up 3.63% in local currency and 0.22% in dollar terms. MCSI Emerging Markets Index declined 5.01% in dollar terms for the quarter. In the Russell Indexes, value stocks out-performed growth stocks, and small cap stocks out-performed large cap stocks for the quarter. Yields for most fixed income securities decreased for the quarter as bond prices increased. The 10-year Treasury note yield was 3.837%, essentially unchanged from 3.834% at quarter’s outset.
Looking Ahead
Since unemployment is currently reported at about 9.7% nationally and at 12.5% locally in the Sacramento region, there is uncertainty about the recovery. Recently passed healthcare related legislation has also caused uncertainty about taxation, medical costs, prescription drug costs and availability of care. All of these and the ongoing financial system “discussions” combine to almost guarantee market volatility in the near-term. There has been speculation in the financial press that the market is due for an up to 10% “correction” in April. We wonder if they just missed the February “correction” or their crystal ball has an electrical short circuit. There has not been any consistent success by anyone in predicting market movement. So, the discipline of remaining fully invested and making changes only when your situation changes, not on market happenings, will continue to be a prudent way to move toward your long term goals.
Thank you for your continued trust and confidence in us. Smart Investor will support your investing efforts through the discipline of broad diversification and full investment. If your goals or life situation should change, please contact us to discuss the possible effects on your investments. If you have any questions, or if we may be of further assistance with your financial matters, please give me a call.
Sincerely,
Allan Henriques
President, Smart Investor
Accredited Investment Fiduciary, Juris Doctorate
Registered Investment Advisor
CA Insurance License No. 0643743
Notes: International investments involve risk including political unrest, economic instability and currency fluctuations. Small cap stocks may be less liquid and subject to greater price volatility than large cap stocks. There is no guarantee that a diversified portfolio will out perform a non-diversified portfolio in any given market environment. Investments in real estate have various risks including possible lack of liquidity and devaluation based on adverse economic and regulatory changes. As a result, the values of real estate may fluctuate resulting in the value at sale being more or less than the original price paid.
Index Definitions: Russell 1000 Growth: The Russell 1000 Growth Index is an unmanaged large cap index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Russell 1000 Value: The Russell 1000 Value Index is an unmanaged large cap index that measures the performance of Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Index: The Russell 2000 Index is an unmanaged small cap index that measures the performance of the smallest 2000 companies (approximately 6% of the total market) in the Russell 3000 Index (approximately 98% of the total market). Russell 2000 Growth: The Russell 2000 Growth Index is an unmanaged small cap index that measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. Russell 2000 Value: The Russell 2000 Value Index is an unmanaged small cap index that measures the performance of Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. MSCI EAFE: The Morgan Stanley Capital International Europe, Australia, and Far East (MSCI EAFE) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in 21 developed countries, excluding the US & Canada. MSCI Emerging Markets: Morgan Stanley Capital International (MSCI) Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets, currently 26 countries. Wilshire REIT: The Wilshire Real Estate Investment Trust (REIT) Index is an unmanaged benchmark index that measures performance of U. S. publicly traded Real Estate Investment Trusts.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Investment advice offered through Smart Investor, a Registered Investment Adviser.