Market Pulse

September 27, 2011

Several members of our team attended a conference in Charlotte last week where we had the opportunity to hear the views of several well-respected market analysts.  We thought you would enjoy reading some of their comments.  The overriding themes were that investors should have diversified portfolios and remain invested in the stock market.  There are global and US concerns affecting the markets which have caused investors to be concerned about the threat of another recession.  The analysts were all in agreement that the market forces shaping theUSeconomy today are different from three years ago.  They commented that it is important for investors to stick with the game plan and asset allocation that meets their risk tolerance.

Ken Goldstein, the Conference Board: “State of the Economy”

Ken Goldstein has been an economist at The Conference Board since 1971.  His principal responsibilities include analyzing current trends in labor market activity and forecasting near-term economic development.

• Not in a fiscal crisis / much different than 2008-2009
• In a demand crisis – why?

    – Consumers are saving more: the savings rate has gone from 0 to 5%  

    - Consumers are waiting for the economy and job market to get better

• Structural changes in the economy

    – More savings

    – Finance sector and employment are shrinking: credit demand is down

    – Housing: no pick up in housing but progress is being made

There is a brighter future with the next new thing and the next new, new thing – think about the technological changes of the last five years.  We will get back to 2.5-3.0% growth but it will take some time.  This growth will come from a combination of productivity and population growth.  The emerging markets will create a new middle class that will consume goods and services.

Dr. David Kelly, CFA^®, J.P. Morgan: Market Overview

Dr. David Kelly is the Chief Market Strategist for J.P. Morgan Funds.  With over 20 years of experience, David provides valuable insight and perspective on the economy and markets.

Consumers and investors are fearful and consumer sentiment is at an all time low due to the following factors:

• Debt ceiling debate and waiting until the last minute
• European debt crisis
• US economy is growing at 1% vs. 3% at the beginning of 2011
• We are scaring ourselves into recession – Dr. Kelly suggested we go out and spend money!
• Demand is low: consumers are waiting to buy cars, houses, household furnishings
• The Federal Reserve’s decision to keep interest rates low encourages consumers to wait to make purchases

Opportunities

• Housing affordability is the best in 50 years: mortgage rates are at all time lows and housing prices are approximately 25% lower than three years ago
• Stocks are inexpensive: they are trading at 10-11x earnings; it is important for the (e) earnings to hold up
• Keep a balanced portfolio
• If we look back in time, the lowest average return in a 50/50 balanced portfolio over 5 years was 1% and the highest return was 17%
• Based on history, balanced portfolios will hold up over time

Randall Dishmon, Oppenheimer: Global investing Today

Randall Dishmon is a Vice President and portfolio manager responsible for the Oppenheimer Global Value Fund.  The fund seeks to uncover value both in US companies and across the globe.  64% of the fund is invested in US equities as the fund managers see good value in US companies from a global perspective.

• US market is the cheapest he has seen in many years and will provide great return in the next 3-5 years
• Emerging middle class is fastest growing with 1.5 million emerging markets families today and this number is projected to double in the next 3-4 years

Novare Capital Management participates in many continuing education events throughout the year and we enjoy sharing this information with you. Please look for more thoughts on the current market situation in our upcoming 3^rd quarter newsletter.  As always, we would be happy to review your portfolio and discuss any concerns you may have. We welcome the opportunity to speak with you.