Weekly Market Update: 27 August 2010

The Economy

• Economic data reflected a slow-growth environment for the U.S. while showing signs of increased optimism in Europe. This confirms our view that global economic growth will continue, but the pace will vary from region to region.
• U.S. gross domestic product grew at 1.6% for the second quarter of 2010; expectations were for growth of 1.4%.
• According to the Richmond Fed Manufacturing Index, manufacturing activity in the Central Atlantic region of the U.S. grew for the seventh month in a row.
• Durable-goods orders increased in July, but growth was weaker than forecast.
• New-home sales in the U.S. for July plummeted to their lowest level since 1963. Home prices fell to a median of $204,000.00, the lowest level since 2003.
• Existing-home sales in the U.S. fell 27% in July; consensus estimates forecasted a drop of 13%.
• U.S. jobless claims fell last week for the first time in a month, helping assuage concerns about a stagnating job market.
• The Office of National Statistics confirmed that economic output in the U.K. grew by 1.2% in the second quarter.
• Retail sales in the U.K. reached a three-month high in August, as warmer weather and tourism boosted sales.
• German business confidence, as measured by the Ifo Business Climate Index, hit a three-year high in August.
• Industrial orders in Europe beat expectations in June, reaching the highest quarterly levels in four years.

Economic Calendar

• Personal income and personal spending will be released August 30.
• The Chicago Purchasing Managers Index and minutes from the Federal Open Market Committee meeting will be released August 31.
• The Institute for Supply Management’s Manufacturing Index will be released September 1.
• Factory orders will be released September 2.
• The change in nonfarm payrolls and the unemployment rate will be released September 3.

Stocks

• Global equity markets were slightly lower in aggregate; however, returns were mixed across regions in a reflection of investors’ perceptions of regional economic growth.
• In the U.K., most sectors outperformed the broader market for the week, with Utilities, Telecommunications and Consumer Staples performing best. Energy, Materials and Industrials underperformed.
• In Europe, Telecommunications, Consumer Staples, Healthcare and Consumer Discretionary outperformed, while Information Technology, Materials and Energy lagged.
• In the U.S., value stocks outperformed their growth counterparts, and small-company stocks outperformed their large-company brethren. Utilities performed best, while Technology performed worst.

Bonds

• Global bond markets were flat, with emerging-market debt underperforming developed-market bonds.
• Global government bonds did slightly better than corporate bonds, supported by continued investor worries about economic growth.
  High-yield bonds and emerging-market debt underperformed for the week due to a decrease in investor risk appetite.

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Index returns are for illustrative purposes only and do not represent actual fund performance.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only.

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