| July 30, 2008
For the quarter ending June 30, the Dow finished at 11350 down 7.4 percent, the Nasdaq Composite ended the quarter at 2292 about flat for the quarter and the S&P 500 closed at 1280 down 3 percent. Year to date the Dow has retreated 14.4 percent, the Nasdaq Composite has surrendered 13.57 percent and the S&P 500 is down 12.8 percent. As of this writing all three indexes have entered bear market status although we have seen some improvement in recent weeks as second quarter earnings are being digested.
Recalling our discussion about the possibility of a bear market last January....it is now upon us. In fact some would argue we have been in a bear market for several years. Bear markets occur on average about every five years and are often triggered by some sort of excess in the economy. Today's bear market is a little unusual in that three are three things happening at once: A major spike in oil prices resulting in higher than normal inflation, an over extended consumer leading to a downfall in housing prices and perhaps most important....a financial system under duress that is now paying for the problems of its own doing.
So what to expect from here? The answer is that the economy improves as soon as the real estate market finds some support, oil prices stabilize and the financial system cleans up its act...signs of which are beginning to happen now but may take longer than we would like. The good news is that the stock market is a leading indicator usually 6-12 months in advance so you may see the markets signal an end to the recession well ahead of the actual event. In spite of the difficult times upon us, we will be better off because of it. We will become more energy independent as a country, we will continue to purchase homes where a down payment is actually required and the financial system will survive and probably grow stronger. Thanks for your patience. |
