January 2010 – Market Commentary

Overview:
• US and International stocks were unable to maintain the gains they posted in November and December despite some positive earnings reports and economic data.  The month started off strong with the Dow gaining 1.5% on the first day of trading, but the final week of January pushed the S&P 500 to a loss of -3.6% for the month of January.

Economic News:
• US and International economic data still offered a mixed picture to investors.  In the US, Consumer confidence, durable goods orders, and manufacturing data showed some signs of strength.  The final week brought GDP growth of 5.7% in the fourth quarter.  Yet, housing remained weak as mortgage applications declined, initial jobless claims spiked in the last week of the year as unemployment remained at 10%.  2009 also so a 33% increase in personal bankruptcies in the US.

• International manufacturing was up in the UK, China, Germany, and the other Euro countries.   China’s economy grew by 8.9% in 2009, ahead of the 8% target established at the beginning of the year, and the China central bank announced  that they would be raising bank reserve requirements to slow growth.  However, Germany’s economy continued to show weakness, shrinking by over 5% in 2009, showing that not all nations are on the right track.

Regulatory News:
• The Obama administration announced that they would be instituting a tax on financial companies that received government aid in 2008 and 2009, and that the revenue would be used to help create liquidity for small loans.

• The US Treasury announced their largest auction of TIPS securities, to  meet increasing demands for inflation protected securities.

• Despite a protracted debate and a lot of criticism of the Fed’s role in the real estate bubble, Fed Chairman Ben Bernanke was affirmed for another term.

Corporate News:
• Earnings season started with Alcoa reporting a $277 million loss on slowing demand from construction and aerospace firms.

• Many companies had positive news:  Microsoft profit grew 65%; McDonalds profit was up 23%; Apple’s profit increased on continued strong demand for their products; and Goldman Sachs ended the year by adding $4.9 billion in profit, to bring the year to date profit to a record $13.4 billion.

• However, many companies are still down:  GE profits fell 19% in the fourth quarter; Caterpillar’s earnings were down 65% on lower orders; Citigroup posted a loss of $7.6 billion; and Morgan Stanley had it’s first loss since going public in 1986.

Index Performance – January:
US Large Cap Stock (S&P 500) -3.60%
International Stock (FTSE AW ex US) -4.28%
US Broad Bonds (Barcap Aggregate) +1.53%
US Government Bond (Barclay’s Govt) +1.45%
Cash (ML 3 Mnth T-Bill) +0.01%

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations and high net worth individuals with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com.

Important Disclosure

Past performance is not a guarantee of future results and there is always a risk that an investor may lose money.  Information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Such expense would reduce the returns illustrated.  Returns are shown gross RWM’s advisory fee. The incurrence or inclusion of an advisory fee will have the effect decreasing performance results.  For example an advisory fee of 1% compounded over a ten year period would reduce a 10% return to an 8.9% annual return.   RWM’s form ADV is available upon request.  The form ADV is the RIA disclosure document that outlines material arrangements and business practices.

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.
Bookmark this page