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MARKET PERFORMANCE
The market volatility of the previous six months carried
over into 2008 with a fury. The up and
down reactions to news are more pronounced today than they have been in several
years. Fear of the unknown has created a
temporary environment where valuation, fundamentals and investment rationale
have been replaced by speculation, shifts of sentiment and momentum.
Equities are down 15% from their peak last summer and
the downturn has been secular in nature.
Stock market volatility will not end until there is renewed confidence
in the global financial system. Similar
to 2002, when the market reacted negatively to numerous accounting
scandals,
investors do not trust the numbers on financial companies’
balance sheets. Just as greed pushes asset prices higher in a
bubble, fear works in the opposite direction in a decline. |