The Market Today
August 2009 Market Recap Upsurge continues The positive developments have led many economists to declare that the current recession has officially ended, though there is little consensus on the expected strength of any pending recovery. Stocks extend rally As big a rally as the U.S. has experienced, investors have shown an even greater appetite for overseas stocks—the MSCI EAFE Index returned 5.45 percent in August and now boasts a gain of 24.78 percent year-to-date. But while stocks in developed economies continued to advance, the MSCI Emerging Markets Index actually fell slightly, by 0.33 percent last month, as investors began to question the sustainability of growth in these still developing economies. In China, for example, where the validity of government statistics is sometimes questioned, investors fretted over the magnitude of government stimulus being employed. As a result, the Shanghai SE Composite plummeted 21.81 percent in August—foiling investors who jumped on the China bandwagon too late. Optimism reigns Manufacturing activity also ramped up significantly in August both at home and abroad. Domestically, the Institute of Supply Chain Management said its index of factory activity rose to 52.9 last month, a number that indicates the first expansion in manufacturing since January 2008. The data was certainly helped by strong auto sales spurred by the Cash for Clunkers program, as automakers Ford and General Motors saw August sales increase by 11 percent and 30 percent, respectively, compared with July. Overseas, measures of Chinese manufacturing activity also rose to a 16-month high, and Eurozone manufacturing, though still exhibiting a slight decline, was much better than predicted. Where to next? Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. ### Adam Brooks, Daniel Evans, & Jared Pearson are financial advisers practicing at Brooks Financial Advisors, LLC, 1567 SW Chandler Ave, Suite 102, Bend, OR 97702. They offer securities and advisory services as registered representatives of Commonwealth Financial Network®, a member firm of FINRA/SIPC. Brooks Financial Advisors is a Registered Investment Adviser. They can be reached at 541-330-6411 or at brooksfinancial@bendcable.com. Authored by John Blood, CFA, chief market strategist, at Commonwealth Financial Network. © 2009 Commonwealth Financial Network® |
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Skeptics, however, were mostly relegated to the background last month, as economic reports in general lent credence to the belief that a global economic recovery is upon us. The National Association of Realtors said its pending home sales index, based on contracts signed in July, rose last month to its highest level since June 2007, indicating that stimulus measures are pushing wary buyers off the fence and into action. In fact, sales of existing single-family homes have now increased for four consecutive months—the longest such streak since mid-2004.