Economic Outlook

Economy Looks Weak Near-Term, Should Gain From Stimulus

What’s the current state of the economy?

The U.S. economy continues to suffer the after-effects of its debt hangover. Although many consumers and corporations borrowed in moderation, the same cannot be said for all consumers and many financial institutions. They loaded up on debt, leading to widespread excesses. Now we’re paying for those mistakes as we unravel this debt and consume less. This has resulted in reduced employment, lower corporate profits and a deepening recession.

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Equity Portfolios

Continuing Economic Storm Creates Long-Term Opportunity

There was an extremely negative tone in the equity markets during the fourth quarter. Could you comment?

Stock prices were indeed very weak. They dropped by one-fifth or more during the period and were an echo of earlier declines that occurred throughout 2008. Price weakness was widespread, as the accompanying table shows.

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Fixed Income Portfolios

Cautious Migration To Corporate Bonds An Upbeat Sign

What happened in the fixed-income markets over the
last quarter of 2008?

Faced with a rapidly deteriorating economy, the Federal Reserve (the Fed) moved aggressively to help retard both the crisis in credit and confidence. Over the course of three meetings, the Fed reduced its target short-term rate from 2% to the current range of 0% – 0.25%. Yields on U.S. Treasury securities – issued by the federal government – also fell sharply.

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