JANUARY 2, 2009

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

The economic data have remained generally weak. The Institute for Supply Management Manufacturing Index fell to its lowest level since June 1980. Details of the report showed broader-based weakness in the factory sector and sharper declines in new orders and employment. Consumer Confidence dropped to a new all-time low in December, with further deterioration in labor market perceptions. Home prices continued to fall sharply in November.

Stock market investors were encouraged by the Bush administration’s efforts to support the auto industry. There's hope that the economy will bottom out in 2009, helped by massive fiscal stimulus. Risk-taking should begin to return, particularly in the credit markets.

Next week, financial market activity should increase post-holidays. The focus will be on Friday’s employment figures. Nonfarm payrolls should have fallen sharply in December (with a decline of 300,000 to 500,000), although seasonal adjustment will add uncertainty. The unemployment rate should move higher, but the increase in recent months has been tempered somewhat by individuals dropping out of the labor force – to be counted as “unemployed,” one has to be actively looking for a job. On Tuesday, the Federal Open Market Committee (FOMC) minutes may provide some insight into the its decision to lower the fed funds target rate to a range of 0% to 0.25%).

Indices

	Last	Last Week	YTD return %
DJIA	8776.39	8468.48	-33.84%
NASDAQ	1577.03	1524.9	-40.54%
S&P 500	903.25	868.15	-38.49%
MSCI EAFE	1237.42	1207.45	-45.09%
Russell 2000	499.45	470.49	-34.80%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	7.25
Fed Funds	0.25	4.25
30-year mortgage	5.26	5.79

Currencies

	Last	1-year ago
Dollars per British Pound	1.468	1.986
Dollars per Euro	1.405	1.459
Japanese Yen per Dollar	90.74	111.64
Canadian Dollars per Dollar	1.220	0.993
Mexican Peso per Dollar	13.71	10.89

Commodities

	Last	1-year ago
Crude Oil	44.60	99.62
Gold	881.45	833.70

Bond Rates

	Last	1-month ago
2-year treasury	0.72	0.84
10-year treasury	2.17	2.57
10-year municipal (TEY)	6.02	6.46

Treasury Yield Curve – 1/2/2009

S&P Sector Performance Charts – 1/2/2009

Economic Calendar

January 5	—	Corporate Layoff Intentions (December) Construction Spending (November) Motor Vehicle Sales (December)
January 6	—	Factory Orders (November) ISM Non-Manufacturing Index (December) FOMC Meeting Minutes (December 15-16)
January 7	—	ADP Payroll Estimate (December)
January 8	—	Bank of England Policy Decision Jobless Claims (week ending January 3)
January 9	—	Employment Report (December)
January 19	—	MLK, Jr. Holiday (markets closed)
January 20	—	Inauguration Day
January 27-28	—	FOMC Meeting

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Investing involves risk and investors may incur a profit or a loss.

US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.

Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.

The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business December 31th 2008.

Weekly Market Snapshot

Market Commentaryby Scott J. Brown, Ph.D., Chief Economist