Glassman Wealth Services LLC

Headlines out of Europe continued to weigh on investor confidence and the Dow Jones Industrial Average fell 4.0% while the S&P 500 index was off 4.2% last week.

From a historical perspective, the most recent 10% correction is roughly in line with prior pullbacks following bear market troughs.  Since the rebound began in March 2009, the S&P 500 index has experienced 5 corrections greater than 5%.  Relative to 5 prior recoveries since 1974, this is entirely normal and in 3 of those instances, the deepest correction was more than 14%.  While this may not ease our nerves as we continue to experience this volatility, it does help us to know that these types of corrections are within the historical norm.

Source: Goldman Sachs

The latest news from the Federal Reserve suggests that interest rate hikes are even further away than many suppose.  Minutes from the April Federal Open Market Committee meeting indicated that a number of Federal Reserve Governors and Reserve Bank Presidents were reducing inflationary expectations for the 2010 through 2012 period.  The biggest change was evident in 2010 inflationary expectations, which were revised  down to 0.9% from 1.2%.

Source: Board of Governors of the Federal Reserve

These historically low interest rates will continue to perpetuate the condition GWS calls our Yield Drought. We address these concerns and highlight our strategies to boost investment income while mitigating risk in our Yield Drought White paper. Please email Lisa Poff @ lisa@glassmanwealth.com to receive your copy.

We  have seen amazing volatility over the past few weeks, but none more than on May 6 when the Dow Jones Industrial Average plunged 1,000 points effectively wiping away $1 trillion worth of equity market capitalization. In our special report, we look at the factors that created the freefall. Click Here for our report.

In our Monthly Economic report, we take an in-depth look at the changes in our markets and the effects of economic policy nationally and globally. This broader perspective provides greater clarity in understanding the forces that affect investment performance and future expectations. Click HERE

Our inaugural Financial Feast, held on last week on Cinco de Mayo at the Ritz Carlton in Tysons Corner was very well-received by our clients, colleagues and special guests.

We want to thank Rick Karlgaard, publisher of Forbes who took us back to the 1970s to give us a better prespective on what we may encounter in the weeks and months ahead.

Please Save the Date of September 15, 2010 for our next Financial Feast. Our focus will be the mid-term elections – the people and policies that will shape our financial future. Look for more details in the coming weeks.