The Stock & Bond Markets -
As Yogi Berra might say, "the future ain't what it used to be." Who would have thought a year ago that oil prices under $110/barrel or gasoline under $4/gallon would be considered a positive which would cause the stock market to rally? Or that, while things are getting worse, the slowing rate of the decline is giving rise to concerns about inflation and the Federal Reserve raising interest rates? Welcome to the new, "new" economy. The S&P 500 had the worst first half of a year since 2002 but has risen .2% this quarter (although it is still down 13% for the year). To make matters worse, the average stock in that index is trading at more than 25 times earnings (note: the last time stocks had this big of a multiple was in 2001 which was followed by a dot.com meltdown that saw the market lose $7 trillion in market capitalization). And historically, September is typically the stock market's worst month with an average decline of 1.2%. Have I cheered you up yet? While trying to predict market bottoms is a sucker's game and they don't "ring a bell" at market tops or bottoms, the fact that the decline is lessening is a hopeful sign as is the fact that the market is a forward looking indicator which means it will turn up before the economy (just as it turned down before the credit crisis and slowing of consumer spending - we always find out why after the fact). I'm advising clients to be well-diversified, maintain moderate cash positions and consider "dollar cost averaging" as a way to re-enter the market with that cash.

Volatility in the short-term U.S. Treasury markets declined to an 8-month low as traders expect the Federal Reserve to hold interest rates "lower" until consumer spending and the economy begin to show signs of improvement. While rates are not particularly high, bonds represent an additional asset class that can reduce fluctuations in your total portfolio's value. I am advising shorter-term maturities since they offer more protection of principal when rates do rise.

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Real Estate -
There is conflicting data on home sales which is welcome news to many. Prices of the S&P Case- Schiller Index of prices in 20 metropolitan areas are 15.9% lower than last year but the decline is less than the amount predicted by economists. Sales of new homes increased slightly while the median price of existing homes fell 7.1% from year ago levels according to the National Association of Realtors. Resales are up from 10-year lows although the number of unsold homes on the market (i.e. supply) is at record levels. While another spike down is possibe, it does appear the worst is over and some investors (including Warren Buffet) are entering the real estate market in various ways.