Economic Overview ~ 2nd Quarter 2008

The US narrowly avoided a Bear market (defined as a 20% decline from a previous high) in the second quarter as the Dow Jones Industrial Average ended the quarter down 19.86% from the highs of October 2007.  The markets were generally positive in April and May, before a significant sell-off occurred in June.  Part of that positive sentiment early in the quarter was attributed to the $120 billion in economic stimulus / tax rebates that were sent out in April.   GDP reported in the quarter was 1.0%, which shows below average expansion, but not negative and therefore not technically recessionary.    Housing prices continued to slide as foreclosures continued to rise.  Unemployment hit 5.5% in June, up from 4.5% a year ago.  Oil surged almost 40% in the quarter from $100 to $140 per barrel.  Prices at the pump are up over 30% from year ago levels.  Consumer Confidence came in at the lowest reading since 1980. The Producer Price Index was up 7.2% for the year ending May 31, 2008 and the Consumer Price Index was up 4.2% over the same period.   Rather than tightening to stave off inflation, the Fed eased rates in April from 2.25% to 2.00% in the quarter. Amid all of the uncertainty in the US, there was a bit of clarity achieved when Hillary Clinton suspended her presidential campaign in early June.

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