February 2009 

The financial markets in the month of February were highly volatile and negative.  The economy is working through the deflating of a massive debt bubble, generated over many years, and this process will continue for some time to come. For the month, stock returns for the major indexes were roughly -11%, bringing year to date equity returns to approximately -18%.  With the economy in full recession, and grave concern over the long term health of many financial institutions, most notably a number of major banks, investor sentiment was most gloomy. Due to the weak global economic environment, corporate earnings will be under pressure throughout the year and, as a result, market volatility will likely remain high.  However, valuation levels are arguably attractive from a long-term perspective, providing patient investors an opportunity to purchase quality companies, with decent dividend yields, at depressed prices. Bond prices were mixed, with longer dated treasury securities declining in the month, while shorter-term municipals generated modestly positive returns.  Credit quality remains paramount for many bond investors, resulting in very low yields available from the highest quality bonds.