Welcome
to the January 14, 2009 issue
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Another Wednesday and another terrible market.
Keep in mind that the economic numbers coming out now are reporting on December
activity. In general, the December numbers have been poor and offer little
comfort that the move down is slowing. But in the midst of today’s gloom
over the very poor retail sales report and the downbeat Fed Beige Book we should
not forget some earlier December numbers that were not so gloomy, such as auto
sales (up slightly) and core capital goods new orders (up a respectable 3.9%).
We need to see some improvement in the all-important consumer sector, but given
the obstacles, it will take the stimulus package in operation before that happens.
Meanwhile there is encouraging news and that is coming from the bond market.
As we mentioned last week the bond market is thawing. And the thaw continues.
As reported by Bloomberg, “Investors are snapping up new corporate bonds
at the fastest pace since May, driving down yields from record high once they
begin to trade.” This is the news we need. A thawing bond market is a
necessary condition for the economic engine to tick faster. It is happening.
Switching gears, as you may have noticed, the falling stock market has put
some of our portfolios well out of line with our recommended allocations. The
portfolios require rebalancing and we will address the issue in the next issue
of MONEYLETTER.
Our view remains that a stock market recovery will be evident over the next
3-4 months.
New Fund Ratings – For domestic stock funds, Powershares HighYield
Dividend Achievers is now rated Buy. Vanguard Equity-Income is now rated Hold.
Fidelity Mega Cap Stock is now rated Sell. For international stock funds, S&P
Global 100 Index (ETF) is now rated Hold.
Fidelity Mega Cap Stock is in the Fidelity Venturesome and Conservative model
portfolios. We will switch the fund into Fidelity Low Priced Stock in both
portfolios.
The Stock Market – After today’s decline we may well
see a test of the November lows. For the short-term this is a critical juncture
for the market. A successful test would give the market a shot in the arm.
The Bond Market –
The Select Portfolio – There is no change for this portfolio.
The next Hotline is scheduled for Wednesday, January 21.
