CI Outlook - Archives

February 2009

February 9, 2009

Looking forward to this year we continue to focus on the interaction of investment markets with investor macroeconomic expectations.  Although the headline news is focused on pending government actions to stimulate the economy, the markets apparently are weary of waiting for the formal announcement.  Technical market indicators such as advance decline figures, and investment sentiment indicators, are showing investor willingness to commit funds, ahead of the plan.  Clearly the markets are beginning to discount a turn for the better.  This confidence is spreading into the bond market, as demonstrated by a rapid decline in rates for high yield bonds, and into the emerging markets, with double digit advances on the year in both Brazil and China.  Advances like these, with so little evidence of economic improvement, demonstrate a rapid buildup of speculative confidence.  Confidence that could easily evaporate if economic conditions deteriorate sharply in the near future. 

We do not expect rapid economic improvement in the very near future.  However we do think that the market lows of last November will hold.  We know the markets always improve before the economy bottoms.  However the lead time is always different with each economic cycle.  In our judgment the current market improvement is warranted but the rapid buildup of speculative confidence is excessive.  Given that excess we believe any rapid move upward in prices will probably not hold.  Therefore we will continue to exercise caution in security selection for your portfolio.

Once again we thank you for your patronage and urge you to contact us with any questions or concerns.

CJ Brott                         Karen Burns

 

   

 


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