Quarterly Thoughts – Q2 2009

In recent quarters, at the height of investor concern about global economic and market malaise, we reminded you that the market often rebounds significantly after dramatic declines, and that market recoveries usually begin before economies heal. The results of the Second Quarter of 2009 bear this out, as part of what we believe is the beginning of the recovery. For example, the S&P 500 Index and MSCI Emerging Markets Index rose 15.9% and 34.8%, respectively, during Second Quarter. The global economy may not out of the woods yet… our research resources are optimistic on the long-term, but over the medium-term, we anticipate mixed economic news. We believe the stimulus plan will have a positive net effect, but its impact will not be felt immediately. The stimulus is being implemented during a time of continued tight credit, will not quickly halt increasing unemployment rates, and may lead to side-effects such as higher inflation and a weaker dollar for a period of time. The economy’s sputtering engine will eventually run more smoothly, but patience will be necessary as the recovery is likely to be gradual and bumpy.

On another subject, you’ve surely heard about the Ponzi schemes perpetrated against many trusting and unsuspecting investors by Bernard Madoff, Allen Stanford and others. We want to reassure you that clients of WealthStep cannot experience a Madoff-type event, because we require that our clients utilize independent custodians to hold assets and produce statements. Madoff, on the other hand (with sleight of hand!), “held” assets within his own firm and “made off” (pun intended) with assets while fabricating false client statements. Ponzi schemes are made possible when investors ignore two fundamental rules:
1. There is no “free lunch”
2. If something looks too good to be true – it is!
WealthStep uses a transparent structure and process and encourages realistic expectations regarding returns, rather than spinning a story that is too good to be true. We keep it real.