RECOVERING SLOWLY – CAUTION REMAINS

“The essence of investment management is the management of RISKS, not the management of RETURNS.  Well-managed portfolios start with this precept.”

Benjamin Graham, The Intelligent Investor

Those folks who manage returns talk about the value remaining fully invested. They state, “it’s time in the market, not timing the market that makes the difference. This is usually accompanied by a mountain chart illustrating long term growth over many years. Along with the chart is a statement that commonly says, “If you missed the best ten stock market sessions of the year your returns are dramatically reduced.”

In fact, over the past 81 years (1928-2009), if you missed the ten best sessions, a $1 dollar investment would grow to only $15. Remaining fully invested would return about $45 on the same dollar investment.

This is a big difference, but it is only part of the story. If the investor could miss the ten worst market days in that time period, the same $1 dollar investment would grow to over $143. The management of risk does appear to be more important than the management of returns.

Looking forward, the economy is growing again, but very slowly. Recent data reports have been consistent with a gradual recovery.

The pace of job losses has decreased significantly, but new hiring appears to have not increased by much.

Wage income growth has been weak. The savings rate appears to be stabilizing. Bank credit remains tight. Spending is likely to advance at a moderate rate, improving gradually over time.

The inventory correction appears to have largely run its course. Exports are improving. New orders and production have been trending moderately higher.

After a substantial correction, the housing sector has begun to improve. However, delinquencies and foreclosures are likely to remain elevated for some time.

Core inflation has been low.

The Federal Reserve will keep the overnight lending rate near zero for “an extended period,” possibly into early 2011. Long-term interest rates should creep up as the economy picks up, but not too rapidly.

We believe the intermediate and long term outlook for the stock market remains positive. However, many short term indicators show the market to be currently well overbought.

Weekly updates on market and economic conditions are available in the Financial Analysis section of our local website at www.RaymondJamesOhio.com.

Please call if you have any questions regarding this general market commentary.

Sincerely,

Larry Cavalena
Registered Principal

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Trading data based on performance of the S&P index.

Information taken from Investment Strategy Report dated 03/15/10.

Opinions expressed here are not necessarily those of Raymond James Financial Services or any of Raymond James affiliates.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Past performance is not a guarantee of future results.  Investing involves risk and investors may incur a profit or a loss.