|
| |
Caution
Reigns as Mid-Year Approaches
Note June
30 on your calendar. Not only is this the midpoint of the year and the end of
the second fiscal quarter, but several other significant events will occur that
may impact investors. Here's a capsule summary of the events culminating on June
30 that could have a significant impact on the economy in the months to come.
 | The United States - or, more
specifically, the U.S.-led Coalition of Provisional Authority (CPA) - has
established June 30 as its deadline to hand over sovereignty in Iraq to a
newly established interim government. The CPA expects elections to be held
before the end of the year, or shortly thereafter, in conjunction with the
writing of a new Iraqi constitution.1
|
| In the second quarter, Frank Russell Company, the prominent investment services firm,
"reconstitutes" its 21 U.S. equity indexes as part of an annual
process to accurately reflect stock market activity and performance. More
than $350 billion is invested in mutual funds modeling the Russell indexes,
which rank the 3,000 largest U.S. companies by market capitalization. The
reranked indexes will take effect after June 30.2, 3
|
| Wall Street expects interest
rates to increase this summer for the first time in four years, possibly
when Federal Reserve policymakers meet on June 29 and 30. The Fed is
expected to raise rates in an effort to rein in inflationary forces caused
by the strongest economic growth in five years. U.S. treasurys have already
reacted. By mid May, yields on the benchmark 10-year Treasury note were
averaging 4.75%, up from 3.75% six weeks earlier. 4 |
Uncertainty on Wall Street has also
been fueled by other factors, such as rising oil prices, terrorist threats, and
the unknowns associated with the November presidential election. Recently, crude
oil prices pushed past the $40-a-barrel mark, long considered a threshold for
investor concern.5
As media coverage begins to focus
on June 30 and its aftermath, the financial markets may become more volatile as
investors cope with rising uncertainty. Short-term events like the June 30
factor underscore the importance of having a long-term plan and sticking with it
during periods of volatility. Please call if you want to review your plan or
discuss various investment options.
Sources:
1) Boston Herald, May 24, 2004
2) Frank Russell Company, 2004
3) There are fees and expenses associated with investing in mutual funds,
including portfolio management fees and expenses and sales charges. Mutual funds
are sold only by prospectus, which contains more information on sales charges,
expenses, and risk factors. Be sure to read the prospectus carefully before
deciding whether to invest.
4) CNNMoney, May 18, 2004. Ten-year Treasury yields are for the period April 6,
2004, to May 18, 2004.
5) CBSNews.com, May 7, 2004
|
