Year End 2007 Market Commentary

By June 30, 2011Main
Year End 2007 Market Commentary
Because you are a valued client, I wanted to write down some brief thoughts for you as they relate to the economy.

For 2007, the volatility in the equity market over the course of the year was significant. Most economists point to these factors that affected the equity markets last year, and will likely continue to influence them this year. They are:
  • Credit:  Starting in the sub-prime mortgage industry, credit concerns caused a sell-off in the bond market.
  • Housing:  Related in some ways to the Credit Crunch, new home sales were down 34% last year. Valuations were down in most other parts of the country.
  • Oil:  Oil prices increased by 57% in 2007
  • Weakening Dollar: The dollar depreciated significantly against the Euro, Pound, and most other currencies.
  • Consumer Spending:  In the face of all other factors, U.S. consumers spent money last year previously not known to exist.
  • Inflation:  Inflation relates to everything else, and most economists predict higher inflation in the coming year.
  • The Fed:  The market likes rate cuts, but rate cuts ignite inflation. There’s no easy answer for Chairman Bernanke and his board for 2008.
  • Globally:  Most emerging and developing countries saw strong growth and good economic strength in 2007 compared to the U.S. markets.
  • Jobs:  Unemployment held below 5% until December, when it jumped 0.3%. Like inflation, unemployment is interrelated and considered carefully by economists.

 

So, now you ask me, are we headed into a recession? Well, I think I finally have enough knowledge, experience, and maturity to answer loudly and confidently…I don’t know”. There are too many interrelated variables to make an accurate prediction.

 

That being said, I think the volatility we saw in 2007 will likely continue in 2008 because there are so many variables in play. As I am writing this, the Dow closed up 1.45% for the day. One percent daily swings have become fairly common recently. So, if you need money out of your portfolio, please let me know in advance so we can plan your distributions carefully. If you are long term, I encourage you to stay the course. Your portfolio is designed to get you to your destination. If you have concerns, please contact me for a detailed review.

 

Personally, I’m excited and fascinated by all of these factors and the market’s reactions to them. Opportunity comes from uncertainty. If you can live with these market fluctuations, then your portfolio should benefit from them over time.

Sincerely,

 

 Rob Schulz 2
Rob Schulz

By Rob Schulz

 

 

 

 

Registered Representative, Securities and advisory products offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member NASD/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. FTFS and Cambridge are not affiliated.