The following is a brief highlight of the market in the fourth quarter of 2007. This quarterly Investment update is available only on our website. The intent is to share market views and research with interested companies, trusts, foundations, and individuals.

Fourth Quarter 2007:

Without a doubt, investors will remember 2007 as the year that the housing market collapsed and triggered a credit crunch. The earnings of just about any company that was involved in homebuilding or lending were crushed. As credit tightened and the housing market suffered, investors became more and more worried about the overall economy, triggering stock declines for many consumer goods companies. While all this was going on, U.S. exports were booming and reached an all-time high of 12.1% of GDP. Not surprisingly, companies with significant foreign-based earnings did well including energy, technology, and materials companies. Overseas stocks also delivered great returns.

There was action in the bond market also. Investors first worried about inflation and then recession. At times they worried about both. The 10 year Treasury yield ranged from a high of 5.25% in June to a low of 3.85% in November. The best action was overseas as the dollar's drop gave U.S. investors currency gains that enhanced their returns. But outside of the government bond market, perceived credit risk rose, leading to underperformance.

Looking ahead, the impact of the housing slump and lack of liquidity in the credit markets has increased the level of economic risk, and recession is a clear possibility, though not necessarily a high probability. Individuals should understand that the possibility of a rough year lies ahead. They should also understand that this is not an outcome that can be predicted with high confidence. We've been surprised by positive market returns many times over the years.

We know there will always be uncertainty in the markets, but what remains consistent is disciplined investment decisions. So what opportunities are being presented to us today?

Please feel free to contact Fergerson Financial LLC to discuss these opportunities in more detail. Click on the contact us tab for email and telephone number.