August 2009 

The month of August was a good one for both stocks and bonds. The major equity indices recorded returns in the 2 - 4% range, and fixed-income securities generated slightly positive returns as interest rates declined a bit. With respect to the stock market, the advance since the March, 2009 lows has been substantial, with the Dow Industrial Average up 45%. However, to keep this in perspective, that index still remains roughly 33% below the peak of October, 2007. The current recession has been exceedingly difficult for most every sector of the economy, and conditions in the US, and around the globe, remain quite challenging. The extent of government intervention is enormous, and the long-term consequences, intended or otherwise, of the massive fiscal and monetary stimulus will have important implications to investors for many years. There are a few nascent signs that the recession may be approaching an end, including more stable (or less negative) home and auto sales and better than expected corporate profits. However, unemployment is high, and will likely present a drag on the strength of the economic recovery prospects for some time to come.