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Market Outlook

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A struggling market is a good time to reevaluate

The market is struggling as equity investors wait for good news to offset a growing list of market worries. Potential buyers are struggling with timing issues and appear to have concluded there is little to lose and lots to gain by waiting until accounting issues, corporate profit issues and the Middle East issues settle down. Indicators are suggesting that the economic recovery has slowed - it will take time to fully understand how much.
    We are seeing the flip side of the euphoria seen in 1999 and 2000. There are no reasons to believe this cycle will be any different from every other cycle that economies have moved through over the last 3000 years. While the catalyst for a turn in sentiment isn’t clearly visible today, one has always emerged.     It appeared that the market hit a psychological bottom last fall in the wake of the September 11 attacks. The collapse of sentiment at the end of a two-year bear market followed by more easing by the Fed should have lifted confidence to a level that could easily weather current corporate news. Unfortunately, that doesn’t seem to be the case.
    The current wave of negative sentiment could get worse but there are positive factors also. There is $2.5 trillion in cash sitting in money market funds waiting to be invested in the market, the economy is growing at a 5.7% annualized rate, and personal income increased better than a 4% annual rate. There is a growing need for long-term healthcare and retirement financial planning and short-term interest rates are 1.5%. Sentiment moves in cycles.
    This is as good of time as any to evaluate or reevaluate your financial objectives. Remember, retirement, education and other goals take planning and persistence. A friend of mine told me that good things do not happen by accident, only bad things.
    Nancy Hadley is an Investment Representative with D.A. Davidson in downtown Sandpoint.

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Nancy Hadley

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