Periodic Commentary - sent 01/23/04
  Hello Everyone,

RE:  2003 -- How Did We Do & What Can We Expect for 2004?

Strong performance for the U.S. Markets in 2003 pleased most U.S. investors.  Dramatic fiscal and monetary stimulus gave the economy a powerful jump-start.  The declining dollar stimulated exports.  Below are some of the key statistics.
 

                 Index                2003 Performance
   Dow Jones  Industrial Average                       +28.27%
   S&P 500 Index                       +28.63%
   NASDAQ Index                       +50.01%
   Russell 2000 Index                       +47.25%

Will the economy continue to strengthen?   Like physical objects once in motion, momentum causes economic systems to continue to move in the same direction.  Since 1900, there have been three periods of consecutive down years.  Each was followed by a multi-year recovery.  Below is a chart on these periods.
 
 

            Time Period 
             &  Problem		              Cumulative 
          Decline in DJIA		              Cumulative 
           Return in DJIA		        Time Period of 
    Cumulative Return
  1929-32  Depression                   -80.03%                +200.33%      4 Years (1933-36)
  1939-41  World War II                   -28.29%                  +37.21%      3 Years (1942-44)
  1973-74   Recession                   -39.59%                  +63.05%      2 Years (1975-76)

Geopolitical issues and the elections are likely to result in above average levels of stress and keep investors uncomfortable through November 2004, if not beyond.  This could provide investors periodic buying opportunities in 2004.  The big question is:  Will these opportunities be at higher or lower prices than today's?

Attached is an updated "What If's" chart based upon December 31, 2003 levels, plus my "Bear Market History" and "After the Bear" charts.  Since I first created the "What If's" chart in July 2002, the "Required Returns" necessary to achieve the assumed rate of return for the decade have dropped significantly.  The carnage of the 2000 Bear Market was enormous!  Returns for the remainder of the decade could be substantially above average without causing the returns for the decade to be abnormally high.

To open these attachments requires a free downloadable program from Adobe. Their hot link is:  http://www.adobe.com/products/acrobat/

For your reference, the hot link to my web site is:  http://www.moneyjungle.com/

Best,
Jim Davis
Founder, The Financial Advisory Group
A Registered Investment Advisor Firm
415/752-6222
Registered Principal, Centaurus Financial, Inc.
A Registered Broker/Dealer
Member NASD / SIPC

The preceding market commentary contains opinions of the author.  Statistics cited were obtained from sources believed to be reliable. Past performance is no guarantee of future results.  Investments in stocks involve risks including possible loss of principal.
 
 

 

 

 

 

 

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James O. Davis, Registered Representative [California Insurance License #0712211]