A Year In Review, The Glass Is Now Half Full

By Gus Krafve

January 6th, 2010

First and foremost, we want to take this opportunity to thank all of our clients who have navigated this tumultuous year with us. We appreciate your business and thanks to you we have finished 2009 with $454 million in client assets, the highest level of assets under management in our company’s history.

As we rung in 2009 last year, we were in the throws of the worst recession since the 1930’s. Credit markets were virtually frozen, pessimism was at record highs and the performance of most markets had been one of the worst on record. The past year has again reinforced the longstanding investment principle of not making sell decisions during periods of extreme investor pessimism. Since the stock market bottomed in early March, the S&P 500 is up 68%. Yes, the old adage “buy low and sell high” still works!

Below, I have listed the performance of some of the major indexes for year end 2009. As we look at the numbers, we clearly see 2009 marked a return of the risk trade. Investors were rewarded for owning more risky assets such as stocks, high yield bonds and commodities. While the S&P 500 was up 26.46%, the performance of the 10 sectors within the index varied dramatically. Technology was the best performing sector +59.9%, while the worst performing sector was Telecom Services +2.6%. For all of the publicity Gold received, it did perform well but underperformed stocks. Treasuries and the U.S. Dollar were two negative performing asset classes for 2009. Both asset classes were flight to quality trades in 2008, a year in which they posted positive returns.

S&P 500 +26.46%
S&P MidCap +37.38%
S&P SmallCap 600 +25.57%
Dow Jones Ind. Avg. +18.82%
NASDAQ Comp. +43.89%
EAFE (Foreign Developed) +24.72%
Long-term Treasuries -13.17%
Barclay’s High Yield Bonds +58.21%
Barclay’s Aggregate Bond +5.93%
Gold +23.97%
CRB Commodity Index +33.43%
U.S. Dollar Index -4.02%

For 2010, we continue to keep a close eye on the employment picture. Employment is a lagging economic indicator and is usually one of the last pieces of the economic picture to turn following the end of a recession. The latest unemployment reading came in at 10.0% for November, down slightly from the October peak of 10.2%. The December reading is scheduled to be released on January 8. Several leading employment indicators have been improving which is a harbinger for employment growth in 2010. While we continue to navigate economic headwinds from several directions, we remain confident and committed that our investment discipline of diversification and quality, within an appropriate asset allocation is the safest way to reach your financial destination.