Spectrum Advisors Newsletter July 2010

"Sell in May and go away?" Come back in July??

There is an old adage . . . "Sell in May and go away!" It certainly seems that this year that could have been wise advice… provided you chose to get reinvested in July.

After a nice start to the second quarter during the first 3 weeks of April, the S&P500 index quickly reversed course, ending the quarter at 1030 for a quarterly loss of 12.5%. No doubt you have experienced some of this loss in your account as you review your June statement. Frustrating . . . yes! Time to panic . . . No!

As I write this, the S&P 500 closed today at 1095, up 6% from its near-term low and having recovered about half of its recent losses. The earnings season is upon us and was kicked off by Alcoa yesterday- beating consensus earnings estimates and sharing an upbeat outlook for future quarters. We believe that many other companies will provide positive earnings surprises as well; setting the stage for a nice rally in stock prices in the coming weeks. While consumer confidence and the manufacturing indexes have moderated, they still signal continued expansion in the economy, albeit at a slower pace.

This is not to say that all is rosy however. Oil is still gushing into the Gulf. The Eurozone is conducting its own version of "stress-testing" on its banking system, and social unrest is evident as austere measures are undertaken in Greece, Spain and Italy to restore and sustain fiscal health. Unemployment in our country remains near 10%, and the national debt and budget deficit continue to increase; unsustainably so!

While we believe that the uncertainty caused by government policies (healthcare law, spending, 2010 tax increases) are dampening the robustness of the recovery (notably jobs), we still believe there are reasons to be optimistic. Corporate balance sheets are flush with cash. As confidence and understanding as to the impact of new laws becomes known, businesses will once again invest in plants, machinery and manpower. Productivity is near an all-time high, as companies squeeze more out of their existing facilities, equipment and manpower translating into higher profits. In addition, average citizens are more interested, involved and outspoken with regard to national affairs than at any time in recent memory. We believe this is a sign that a more moderate, bipartisan, fiscally sound approach to government will prevail in the near future.

We will remain ever vigilant with regard to changes to the economic and political landscape that may impact the value of your investments. In addition, we would like to reiterate our belief in the use of alternative investment vehicles, many of which offer protection of principal and guaranteed growth, to hedge against future uncertainties in the stock and bond markets. We have incorporated these products and techniques with many of you with great results. It would be our pleasure to share these ideas with others that you care about who could benefit.

Enjoy the rest of your summer!

Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/ SIPC Headquartered at 18 Corporate Woods Blvd., Albany NY 12211