Welcome to the April 16, 2008 issues

View MONEYLETTER Hotline as a PDF (click icon):     
or keep reading...

Last week's Hotline pointed out during earnings season investors are focused almost exclusively on the earnings reports. This week, especially today, gave the proof to that statement. Earnings this week, from heavy hitters such as IBM, Intel and JP Morgan, have been better than expected, and the market has responded. While the earnings were better than expected, they were still down from last year. But they were better than had been feared, and that is the message of this week. It turns out that the market's fears of poorer earnings were correct, but the fears had been overdone.

Putting it in market terms, the market has overcorrected in adjusting to a coming recession. What is happening now is correcting for that overshoot. From that perspective, we do not see the better market action this month, after a miserable March, as the start of a new bull market. We see it more as setting the groundwork for a much better market to come. The short-term economic outlook remains very rocky but these earnings reports are telling us that the economy is more resilient than a battered Wall Street projected. We continue to see equities as the asset of choice in this environment.

There is no change in our recommended allocations.

New Fund Ratings – For domestic stock funds, two funds are now rated Buy: Fidelity Convertible Securities and SIT Large Cap Growth. For international stock funds, UMB Scout International is now rated Buy.

As mentioned in the last Moneyletter, Gateway Fund, in the Moneyletter Conservative portfolio, has become a load fund. As is our usual practice, we will remove the fund from the portfolio. Its replacement will be Fidelity Balanced Fund.

The Economy – There was a positive surprise or two in the economic reports this week as well as in earnings. Most notably, industrial production in manufacturing rose, only a scant 0.1% to be sure, but all the indications were for a tangible drop. While production did well, the consumer is struggling, particularly with energy prices in the stratosphere. Once again, the stimulus package will help.

The Stock Market – Commodities have been rallying and our portfolios have benefited. It is not only oil that is moving up. Latin America, tied to commodities, has been doing very well. The Asian markets have been acting better. We remain positive on overseas markets.

The Bond Market --

The Select Portfolio – There is no change for this portfolio.

Back