Welcome
to the February 18, 2009 issue
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Though only two days old, this has been
a very discouraging week for investors. Tuesday’s 4% decline in all the
averages shattered already fragile investor confidence. The President’s
signing of the stimulus package cut no ice with investors who were determined
to sell following the steep declines in overseas markets.
The economic numbers out today on January activity have not helped. There
was nothing there to rouse the market to an oversold rally. The only relief,
if we could call it that, came from the Minutes of the Fed meeting held the
last days of January. The near-term outlook was as gloomy as the Fed has ever
been. In addition, they stressed the uncertainty of any outlook right now.
When it came to their projections, however, they are still looking for a recovery
to set in over the last half of the year. And the stimulus package is given
part of the credit for that outlook.
Such an economic outlook is behind our view that we should see a market recovery
becoming evident over the course of next quarter. Yes, we have moved the recovery
up a quarter, given the economy’s troubles. We need one other shoe to
drop and that is a meaningful bank rescue package. Washington needs to reverse
the disappointment over Secretary Geithner’s first proposal. We believe
the market is hungry for better news. We believe it will get it over the next
few months.
There is no change in our recommended allocations.
New Fund Ratings – For domestic stock funds, Harbor Capital
Appreciation is now rated Buy. Wells Fargo Advantage C&B Mid Cap Value
is now rated Sell. For international stock funds, USAA World Growth is now
rated Hold. Fidelity Worldwide is now rated Sell.
Fidelity Worldwide is in the Fidelity family Venturesome and Moderate portfolios.
In the Moderate portfolio we will switch the fund into Fidelity China Region.
For the Venturesome we will use the proceeds to add to our holdings of China
Region, already in the portfolio.
The Stock Market – Tuesday’s market slide set up a test
of the lows. Today’s flat market gave no answer to the test. The outcome
of the test is important for the near-term outlook. A successful test would
bolster confidence.
The Bond Market –
The Select Portfolio – There is no change for this portfolio.
The next Hotline is scheduled for Wednesday, February 25.
