August was another very strong month for the stock market and, most importantly, our broadly diversified strategy fared very well again with most asset classes outperforming US Large Cap stocks as measured by the S&P 500. Real Estate Investment Trusts (REIT’s) were particularly strong, up about 13.5% after lagging badly early in the year and now up over 10% for the year thru 8/31. Year-to-date gains for most stock asset classes range from +15% to +33%.
Interestingly, if you look at most stock asset classes for the 12 months from 08/31/08 to 08/31/09, the losses range from about -15% to -20%. Not good, but not nearly as painful as what we feel like we have been thru and not fully reflective of the roller coaster ride of the past 12 months. Losses of 15% to 20% aren’t fun, but are typically more tolerable and expected for stock market investors. So if we look at it this way, maybe we can forget the 56% decline in the S&P 500 from October 9, 2007 to March 9, 2009?!
Some promising economic statistics have been reported. The Institute for Supply Management index rose to 52.9% in August above the 50.5% expected by economists surveyed by MarketWatch and higher than the 48.9% in July. It's the highest reading since June 2007. Readings above 50% in the ISM diffusion index indicate that more firms are growing than contracting. The ISM bottomed at a 28-year low of 32.9% in December, and has been steadily marching higher since. The ISM non-manufacturing (service sector) index rose to 48.4% in August from 46.4% in July.
On the unemployment front, the number of people filing for state unemployment benefits for the first time last week fell 4,000 to a seasonally adjusted 570,000, down about 100,000 from the peak in March. About 6.2 million people are collecting state unemployment benefits, down from a peak of 6.9 million in late June. Unemployment continues to be a major economic drag.
I sometimes compare stock market forecasting to weather forecasting, and there is no consensus in weather forecasting either. The Farmer’s Almanac is calling for a frigidly cold and very snowy winter in the Midwest, while the National Weather Service is calling for above-average temperatures. I probably trust The Farmer’s Almanac more, how about you? So enjoy these autumn days then get ready to bundle up!
As always, your trust and confidence are important to us and we appreciate the opportunity to serve you! Please contact us with any questions you have.
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