The Stock & Bond Markets -
While the stock market rallied by 10% the last week of November, the economic realities that have driven the S&P 500 down about 40% this year have not improved. The market is a leading indicator, however, and is likely to improve before visible economic indicators turn around. One such indicator, the Institute of Supply Management (ISM) which measures manufacturing activity is now at the lowest level since 1982. It's worth noting that indicator isn't based on psychology or opinion but simply a measure of activity or lack thereof. I'm encouraging clients who are fully invested to actively re-balance their accounts among asset classes and industry sectors and, for those who raised cash and are looking for bargains, to scale into the market without trying to predict a "the bottom."

Treasury bills, notes and bonds continue to be the asset of choice for many who were looking for the ultimate in safety given that, unlike many firms that went under, the government can print money to cover debts. It's worth noting the Federal Reserve has lowered interest rates dramatically and there's not much room for bond values increasing as a result of lower rates since we're approaching a rate of zero. Given that, I'm recommending clients who don't need income to pay bills shift into lower yielding, short-term bonds which won't go down at the same rate as long- term bonds when rates do start to rise.

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Real Estate -
With foreclosures soaring at record rates, the economic picture dimming and job losses ramping up, all the elements were in place to push prices lower. The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. That eclipsed the previous record of 15.1% set during the second quarter. Prices in Case-Shiller's separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%. Home prices in the 10-city index have fallen for 26 consecutive months. The decline has broadened over the past 12 months, with prices dropping in every city of the 20-city index during September. In the weakest market, Phoenix, the 12-month loss came to 31.9%. Las Vegas prices plummeted 31.3% and San Francisco recorded a 29.5% decline. The best performing markets, Dallas and Charlotte, N.C., still posted drops - 2.7% in Dallas and 3.5% in Charlotte. Despite the acceleration of the decline, these declines are trailing and there are signs of a bottoming in supply as investors have begun to increase their purchases at these low prices