Economic Overview ~ 4th Quarter 2009

The year 2009 ended far better than the prior year.  Equities were up in all countries, capitalizations, and styles.  The S&P 500 was up 26.5% for the year to 1115, which is a 67% improvement over the March lows.  For the decade ending December 31, 2009 the annualized return for the S&P 500 was -0.95%.   GDP posted the first positive quarter since mid 2008.  Even though the reading was revised downward from the initial read of 3.9% it was still a positive 2.2% growth.    Institute for Supply Management (ISM) levels were in expansion territory at 55.9, the highest reading since April 2006.  Even though there was strength in the markets, there were concerns in the economy.  Unemployment hit 10.2% in October, the first time in double digits since 1983.  Consumer Confidence was down slightly from the prior quarter as the employment situation weighed on sentiment. Housing starts were low in October, but sales of existing homes were up through the quarter as the first time home buyer tax incentives were extended by Congress. The gold markets were shining bright experiencing their first ever close above $1200 in December.  Oil has reversed the skid from 2008, adding 12% in the quarter and 78% in the year to end just under $80. As a major shareholder, the US government flexed some muscle in the quarter by forcing out BofA CEO Ken Lewis and GM CEO Fritz Henderson.  Those executives that stuck around had a pay czar watching their compensation plans to make sure it was fair.  BofA, Citi and Wells rushed to repay a total of $90 billion of TARP funds to get out from under government scrutiny. The only action concerning the Fed in the quarter was that the nomination of Chairman Bernanke received approval from the Senate Banking Committee (16-7).  The senate passed the health bill along party lines (60-39) in a Christmas Eve vote.

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