October 14, 1999
As you may have noticed by watching the news media this past quarter, interest rate concerns were foremost on investors’ minds. Inflationary pressures and Fed interest rate hike expectations made for a volatile third quarter. Year-to-date, small-cap international funds have gained the most while large-cap domestic technology heavy funds have extended their impressive run for yet another quarter.
Even though U.S. economic fundamentals remain solid, the buoyancy of the markets over the first two quarters has abated within the last three months. For the record, the S&P 500 Index has declined 9.6% from its year-to-date high of 1,418 points on July 16th while the Dow has declined 8.7% from its high of 11,326 points reached on August 25th. In Wall Street jargon these two indices have been flirting in and out of the “correction zone” over the past month. The Russell 2000, which is comprised of small-cap stocks, has not been far behind – declining 8.3% from its high.
There has been no respite for bondholders either with the Long-term Treasury Bond return down 6.76% for the year. Therefore, it should not come as a surprise to most of you that your year-to-date returns are not as healthy as you may have thought. In addition to market returns, individual investor risk tolerance and investment objectives play a significant role in how we position your portfolio (i.e. in our asset allocation), and consequently in the returns that you receive.
With the possibility of additional interest rate hikes, the concern over Y2K related issues and the typical volatile October markets, we are cautiously looking forward to the final three months of 1999. We remain steadfast in our money management approach of staying invested over the long-term and not practicing market timing techniques. We are confident that each of your portfolios is properly positioned given your risk tolerance and investment objectives. If your investment objectives or personal financial situation has changed, it is important to notify us so we can reevaluate your portfolio.
Sincerely,
President
Vice President