Current Investment Outlook

Concerns about an impaired financial system and the weak economy continue to weigh on investor sentiment. The U.S. economy is teetering on the brink of a consumer-led recession. However, recent actions by the Federal Reserve along with the massive monetary and fiscal stimulus programs are providing some relief to the economy already.

We remain underweighted in the Consumer and Health Care sectors while selectively increasing the weighting in Financial Services. We are overweighted in those areas that would benefit from an early resumption in economic growth such as Industrials and Technology.

• Economy: The credit crisis continues to rear its ugly head, threatening economic growth both domestically and abroad.
• Commodities: Aggressive price increases in commodities are fueling inflation and pressuring the wallets of consumers and corporations. Is it a bubble or are we in a new era? History doesn't always repeat itself, but it rhymes.
• Inflation: The headline CPI is a concern, but there are few signs it is being passed along in the form of higher consumer prices or wages.
• Consumer: The "perfect storm" of headwinds has consumer confidence at multi-decade lows.
• Valuation: Rising inflation will pressure valuations. However, large-cap high quality stocks offer the best value.

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