FEBRUARY 2009 NEWSLETTER

The first months of 2009 bring the continued onslaught of scary headlines, disheartening economic indicators, and falling stock prices. It is at times like this that it is imperative to recall that the end of a recession or bear market ushers in a recovery and a bull market. These recoveries in the investment markets usually come quickly and a large proportion of the gains occur early in the recovery. Stocks are a leading indicator of the economy in general (often by as much as 6-9 months). We will see rebounds in stock prices even as we continue to digest dismal headlines regarding unemployment. A bear market will often end before such lagging indicators improve, and the rising market is often said to be “climbing a wall of worry.”

There are stages that make up an economic recovery. Certain areas of the economy lead, and other areas lag. For instance, employment data will improve ahead of housing markets. This makes sense. A rising stock price reflects favorably on a company that has improved its profits through layoffs. As more people find work, consumer confidence improves, and spending increases. It is only then that we begin to see fair market values of homes stabilize and ultimately rise as people are once again inclined to buy a new home.

This is what gives us the confidence to be expecting a rebound. That and the fact that our government has taken unprecedented actions in the form of stimulating our economy with $7.3 trillion worth of fiscal and monetary aid. Congress is hoping that government spending will kick start the economy. We hope it will replace the reduced personal consumption and that this will lead the turnaround. The timeframe is uncertain, but our research is leading us to believe that a bounce will most likely occur in the middle to end of 2009. This will be the opportunity we seize to move out of equities and in to short-term fixed income instruments like CD’s. We anticipate the general perception of the country will be that “happy days are here again!”, when in actuality this rebound will be short-lived and will have been buoyed by unsustainable government spending.

We continue to digest and filter a variety of research sources on a daily basis to give us this cautiously optimistic outlook in what are very bleak times. We will continue our policy of constant communication and frequent meetings to be certain that we are adjusting your plan so that your goals and objectives will still be met. Please contact us now if you have special concerns that require immediate attention.

Respectfully,

Your Advisors at Dominion Wealth