Investment Newsletter

The following highlights are excerpts from Associated Trust Company's quarterly newsletter: The Economic & Investment Environment, written by noted writer and speaker Sara Walker, CFA. Ms. Walker, a senior vice president and portfolio management team leader with the Milwaukee office of Associated Trust Company, is well known for her in-depth analysis of current market trends and objective outlook for the economy.

Click here for the full version. (Requires Adobe Acrobat Reader.)

• Investors made it through September! One of the most worrisome months in terms of investment performance and important anniversaries passed by without much of a hiccup. Despite a two-week selloff, the month ended on a positive note and third-quarter performance was worthy of a two-hour Hollywood award show. The S&P 500 gained +3.73% in September and +15.61% in the third quarter for its best quarter since 1998. The NASDAQ composite shared the limelight with a +5.69% September gain and a +15.91% third-quarter gain. The Morgan Stanley EAFE index showed foreign markets with a gain of +3.85% in September and +19.56% in the third quarter.
• High-fives were abundant in the bond markets as well with strong performances across the risk spectrum. The riskiest bonds performed the best with high-yield (also known as junk) bonds up over +15% in the quarter. Investment-grade bonds rallied about +8.3% in the quarter and U.S. Treasury securities were up about +2.1%. The Barclays Government/Credit index of bond market performance gained +1.14 % for the month of September and +4.16% for the third quarter.
• Risk also appealed to stock market investors as the Federal Reserve kept the floodgates of liquidity open. Companies once thought to be on the road to insolvency attracted the most investor attention in this liquid environment. The most beat-up sectors were star performers in the quarter with financial stocks up +25%, materials stocks up +21% and consumer discretionary stocks up +19% . Small company stocks also posted gains with the Russell 2000 up +19% in the quarter.
• In addition to liquidity, better than expected corporate earnings guidance fanned the flames of this rally. After dropping earnings growth estimates to near-Depression era levels, Wall Street analysts began to raise their forecasts as companies reported great success with cost-cutting efforts. As a result of these efforts, productivity gained +6.6% on an annualized basis in the second quarter, and it is expected to advance again in the third quarter by about +5.5%.
• Continued job loss was reflected in those productivity numbers. September’s employment report showed a worse than expected loss of -263,000 jobs. Additionally, the report indicated the average work-week returned to its record-low level of 33.0 hours. Although this report stirred skepticism amongst investors, most attention was directed to quarterly improvement in the job loss figures. The average monthly job loss in the first quarter of 2009 was -691,000. In the second quarter, this loss averaged -428,000. The average monthly job loss in the third quarter of 2009 was -256,000.
• Economic activity showed signs of stabilization in the quarter. The Conference Board index of leading indicators gained for the fifth month in a row. Its August gain put the index +1.9% above year-ago levels and at its highest level since April 2006. This report led many economists to believe our Great Recession ended this past summer. Additionally, the final estimate of second-quarter Gross Domestic Product (GDP) growth was released with better than expected numbers. Activity declined by about -0.7% in the quarter compared to earlier estimates of a -1.0% decline. Consumer spending and business investment were both revised upward. Inventory depletion continued in the second quarter, but its replenishment is expected to drive third-quarter GDP growth to almost +3% as companies stock their shelves once again.
• Investors remained leery of the “less bad” numbers and continued to hold near-record levels of cash on the sidelines. Some estimates put this cash at about 40% of the U.S. stock market capitalization. It earned near 0% in the month of September and could provide continued support for the stock market as investors seek positive returns.

Back to Top

---

The trust and investment services described are provided by Associated Trust Company, NA. Investment management services are provided to Associated Trust Company by Associated Investment Management, LLC. All are affiliates of Associated Banc-Corp.

Investment products are not FDIC insured, may lose value, and have no bank guarantee.

SECURITIES AND ADVISORY SERVICES ARE OFFERED BY ASSOCIATED INVESTMENT SERVICES, INC. (“AIS”), member FINRA and SIPC, d/b/a Associated Investment Services Group in Minnesota. • Insurance products are offered by licensed agents of Associated Financial Group, LLC. (“AFG”). • Fiduciary, administrative, and planning services are provided by Associated Trust Company, N.A. (“ATC”). Investment management services are provided to ATC by Associated Investment Management, LLC (“AIM”). • Securities and insurance products offered are NOT deposits or obligations of, insured or guaranteed by Associated Banc-Corp (“AB-C”) or any bank or affiliate, are NOT insured by the FDIC or any agency of the United States, and involve INVESTMENT RISK, including POSSIBLE LOSS OF VALUE. • Advisory services may not be available in all locations. • AIS, AFG, ATC and AIM are all affiliates of AB-C. • Associated Wealth Management is a marketing name AB-C uses for products and services offered by AIS, AFG and ATC.