Obama passes warming bill

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2008 What Happened in the stock market!

As we look at 2009, it is always important to look back and see where we have been and understand why. The 2008 downturn was fueled by a series of events that combined to create the perfect storm which resulted in some of the largest stock market losses in sixty years. This storm was driven by the worst credit market crisis and biggest threat to the U.S. financial system since the 1930s. (Fidelity Management & Research Co. – 12/15/08) The credit crisis was primarily created by the opportunity of sub-prime loans and lack of integrity by numerous financial institutions and rating agencies. Consumer confidence also played an important role in the past year as consumers began to pay down debt and rebuild savings. Rather than provide you with a prediction of when the stock market and economy will improve, we think the following areas are of importance to the recovery:

• The stabilization of home prices,
• The stabilization of employment,
• The restoration of bank balance sheet health,(BMO Capital Markets – 12/19/08)
• An increase in consumer confidence. Extremes in confidence often come at critical market turning points. One reason is when pessimism reaches such extremes, it has no where to go but up. (InvesTech Research – 12/12/08)

We have observed the following market improvements:

• The University of Wisconsin states that Forward Looking Consumer Confidence has begun to improve.
• The number of companies on the NYSE and the OTC Exchange that are advancing in price compared to declining in price is showing signs of strength.(WSJ – January 2009)
• There is a favorable absence of sellers initiating trades since the beginning of January. (InvesTech Research – 12/12/08)

We will leave you with a final thought from our October newsletter that bears repeating:

Volatility always spikes following a market decline and will last for many months. Bull markets begin in highly volatile markets.