Better Than It Seems

As we’re meeting with our clients this fall, many are pleasantly surprised with the performance of their investment accounts. We frequently hear something like “ That’s great. With the market and economy being in so much trouble we were concerned that our investments may be as well” It seems that today more than at any other time, the perception of both the economy and the markets (mostly from the media) is very much different from the reality (the actual performance numbers).

The perception: crippling hurricanes, high gas prices, increasing interest rates and, so far this year, a quietly sagging stock market. Ouch!

The reality: Hurricanes? Nothing new there. Gas prices? Adjusted for inflation, the’re in the same neighborhood as 1982*. Interest rates? It could be that the rising interest rates are a positive indicator about the strength and the expansion of our economy. A quietly sagging stock market? Truth be known we’ve come to appreciate quiet markets.

Let’s take a look at some economic indicators.

  1. The Department of Commerce reported that second quarter 2005 Gross Domestic Product grew at a 3.3% annualized rate. A good rate.
  2. Housing starts rose 3.4% for September 2005 to an annual rate of 2.11 million units**. This is the fastest pace since Feburary and one of the highest rates ever.
  3. The Bureau of Labor and Statistics reported that the September 2005 unemployment rate was 5.1% (not the best we’ve ever seen, but certainly not the worst). Over the last twelve months ending in August 2005, payroll employment grew by an average of 194,000 a month and the unemployment rate has trended downward during that year.

Those of you who have been investors over the last ten,twenty, thirty or more years know that there is always an abundance of negative news. You also know how well the markets overall, and in particular your individual investments, have performed over those same periods.

We’re not saying that everything is rosy; we know that there is room for improvement. We are however, recommending that the next time you feel a little uneasy because of the current dose of bad news, call us for a closer look at reality.

Thanks for your business,
Sycamore Financial Group

*The Big Picture. Posted 8/17/05
** U.S. Department of Commerce report dated 10/19/05

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Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.