The Markets
 

The markets have continued to perform well in December. We hope that this will lead us to an upward trend in 2007, but everything is not as rosy as it may appear.

Third quarter GDP was just reduced from 2.2% growth to 2%. While this may seem nominal, GDP grew at 2.7% in the second quarter. The housing market decline continues to weigh on the economy and does not show signs of turning around. While inflation seems under control, some fear that the Fed may have raised interest rates too high. The elevated interest rates could be a drag on the economy as well as businesses (some of which are beginning to caution on 2007 projections).

Many economists feel that the economy is headed in the right direction. They point to lower fuel costs, unemployment, and disposable income as reasons the economy will perform well in 2007.

With oil coming down in price, we may continue to see a reduced inflation figure. Increases in oil prices impacted the cost to transport goods, produce many household items, and the price we pay for gas. Now that inflation appears in check and that the economy is growing at a reduced pace, many believe the Fed may begin to reduce interest rates in early to mid 2007. This could be a catalyst for strong economic growth.

While no longer able to tap into their home equity, consumers now have more income at their disposal. With the reduction of oil costs, moderate inflation, and low unemployment figures, economists believe that the consumer will continue to drive the economy in 2007.

While 2007 may see continued gains in the stock market, I remain somewhat cautious. Early 2007 may see some profit taking and any signs that the US may be headed for a significant economic pull back will likely lead to a market decline. The key to success in 2007 will be investment diversification- providing the ability to participate in market gains while providing some protection should the market decline. In the end, I believe we will see the markets grow, but they will increase by levels below historic averages.

Research Publications 

 The Office
 

This month I traveled to Chicago to attend an industry conference. As always, the meeting provided valuable insight into the economy. My favorite part of these conferences, however, is hearing the professional portfolio managers speak about their investment strategies and market outlook. While researching investments online provides valuable information, getting the opportunity to meet the managers provides the greatest value.

Over the past few years, I have had the opportunity to meet half of the professional portfolio managers I use, and I have listened to the others during conference calls. These conferences have been extremely helpful in creating and monitoring portfolios. They have also been validating. After listening to the managers, I feel even more confident in our approach to wealth management.

Our office will be closed on December 25th and January 1st. We will reply to any calls or emails received those days when we return. Happy Holidays!

 

 The Family
 

Well, December was fairly tame by our family's standards. Both Heidi and I were busy at work with the year's end approaching, so we were not left with much time for adventure. We are looking forward to spending Christmas with my family in Pennsylvania and seeing my God-daughter and her parents over New Year's.