| An eNews Update to our Quarterly Newsletter |
June 2002
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Investment Markets in 2002 Last month, we published the year-to-date performance numbers for various market indices. Five indices were down, and five were up. Seems confusing, but not really so. Different markets act differently during any time period. That's the essence of asset allocation, which we diligently practice in our clients' portfolios. Now, let's view various recovery years spanning all decades going back to the 1930s through the 1990s. The key point here is that you cannot discern a market recovery while it's happening! If it were that easy to recognize, market timing would work, and we know that it doesn't. Instead, one must look to fundamental data to determine if a recovery is in process. The markets will gyrate daily, weekly and monthly throughout the period, but the year will reflect that a recovery has occurred once it's over. View the recovery years, and pay close attention to the market's movement on a month-to-month basis. You could not have determined that a recovery was in process for looking at one or several months any more than you can define the shape of the forest when standing deep among the trees. Large Company Stocks Percentage Returns by Month and Yearly Totals*
In June of 1933, you might have assumed a recovery was in process. Then you were hit with an 8.62% decline - in one month. You might have concluded that it really wasn't a recovery, panicked out and then watched August recover 12.06%, September drop 11.18% and so on. But, the year finished up 53.99%. The same scenario could be outlined for every year shown. History is no guarantee of the future. But, what better indicator do we have? The published economic statistics reflect that a recovery is in process. We're not going to repeat what you're reading and hearing every day. But, the recovery will not be linear. It won't go straight up just to make us feel better. It will happen in fits and starts as it always has. The four problems plaguing the markets remain. But, every recovery has had its own set of problems. No period in time is without challenges besetting the markets. The markets are now concerned with the Middle-East conflict threatening the price of oil, a return to profitability for many corporations, a restoring of confidence in corporate reporting and governance, and the direction of interest rates. All of these will be covered in our next month's newsletter, which will arrive in quarterly, hard-copy format.
This article is for informational purposes
only and not intended as financial advice. Consult your financial
advisor to determine what is appropriate for your situation. If you have any comments, questions or suggestions concerning this
electronic newsletter, please email us at fgi@fragassogroup.com.
Visit Our Web site: A REGISTERED INVESTMENT ADVISOR ©2006 The Fragasso Group, Inc., All Rights Reserved
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