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While the major headlines were scary, some good news occurred last week, too. The Commerce Department said retail sales rose a solid 0.5 percent in July and first-time unemployment claims dropped below 400,000 in the week ended August 6. That was the lowest level for unemployment claims since early April, according to MarketWatch. With markets dropping and volatility rising, some pundits are now comparing the current market environment to the 2008-2009 financial crisis period. And, while there are some similarities, The Wall Street Journal pointed out a glaring difference in its August 13 edition. The panic in 2008 represented a crisis in markets. What's happening now seems to be a crisis in government. In 2008, the world's richest countries embarked on a series of unprecedented interventions to stop financial markets from seizing. Today, the tables are reversed: Financial markets have lost confidence in politicians' ability to master their problems. In 2008, countries united in response. This year has been marked by tensions and misunderstanding, including those between the U.S. and Europe over the continent's response to its debt crisis. This crisis in government has led to a crisis in confidence in consumers. According to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment, U.S. consumer confidence dropped in early August to the lowest level since Jimmy Carter was president in May 1980. This extremely low confidence level may be a headwind for the economy. At times like this, it is very important to maintain perspective. While the markets are swinging wildly, the S&P 500 index still closed last week more than 9 percent higher than a year earlier, as shown in the box below. As investment managers and investors, we cant let short-term gyrations derail us from our longterm objectives.
Data as of 8/12/11 Standard & Poor's 500 (Domestic Stocks) DJ Global ex US (Foreign Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index 1-Week -1.7% -1.7 2.2 4.7 0.6 2.0 Y-T-D -6.3% -10.3 N/A 23.1 -3.3 -0.4 1-Year 9.2% 4.5 2.7 43.1 18.3 12.9 3-Year -3.0% -3.9 3.9 28.5 -5.7 -0.4 5-Year -1.5% -1.3 5.0 22.7 -1.8 0.1 10-Year -0.1% 4.6 5.0 20.2 4.2 9.5
Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barrons, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.
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