Front Range Financial Consulting

As the month ended, gross domestic product calculated for the fourth quarter of 2009 showed a seasonally adjusted annual growth rate of 5.7%, Federal Reserve Chairman Ben Bernanke won confirmation to a second four-year term and the Reuters/University of Michigan consumer sentiment index rose to 74.4, its highest level since January 2008. Yet, the major financial market indices finished the month below their 2009 closing figures. The so-called “January effect” – the idea that generally stocks will rise in January after tax-loss harvesting in December pushes down prices – took a beating. For the record, the Dow Jones Industrial Average (an unmanaged index of 30 widely held stocks) closed the last trading day in January at 10,067.33, down 3.5% for the month. The NASDAQ Composite (an unmanaged index of common stocks listed on the NASDAQ National Stock Market) finished January at 2,147.35, down 5.4% for the month, and the S&P 500 (an unmanaged index of 500 widely held stocks) closed at 1,073.87, down 3.7% for the first month of the new year. In fact, for much of January, the indices floated well above their December closes. But as the month ended, the economic pot was stirred. Bernanke’s reappointment suddenly seemed doubtful; politicians railed about various aspects of the banking industry, and home sales and mortgage application figures dipped. Volatility – mild in comparison to the wild swings of 2008 – returned as the Dow dropped 213 points on January 21, its worst single-day decline in nearly three months. Nevertheless, underlying the current turmoil, the prevalent idea is that the economy is in fact slowly improving. The GDP figure, with a strong increase in capital spending, showed its best quarterly growth since late 2003. And consumer sentiment – an important indicator for an economy that is 70% based on consumer spending – is at its highest level in two years. While no one knows exactly where the markets are going in 2010, investing opportunities exist, so if you have questions about the markets or simply want to discuss your portfolio, please don’t hesitate to give us a call.