Investment Newsletter

The following highlights are excerpts from Associated Trust Company's quarterly newsletter: The Economic & Investment Environment, written by noted writer and speaker Sara Walker, CFA. Ms. Walker, a senior vice president and portfolio management team leader with the Milwaukee office of Associated Trust Company, is well known for her in-depth analysis of current market trends and objective outlook for the economy.

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• September 2008 lived up to the reputation of many prior Septembers. It is often not a good month for stock market investors. The S&P 500 ended the month with a total return of -8.91%. For the third quarter 2008, the total return was -8.37%. The NASDAQ composite turned in a performance of -11.60% for the month of September and -8.59% for the quarter. Year-to-date numbers are -19.29% and -20.64% respectively.
• Foreign markets offered no port in the storm. The Morgan Stanley EAFE index declined by -14.51% in September and -20.59% in the third quarter. This measure of the performance of European, Asian and Australia markets has a total return of -28.93% for the year-to-date period. Arguments about the rest of the world “decoupling” from American markets have weakened significantly.
• The bond market has also been extremely volatile. It is a tale of two bond markets because investors have flocked to the safety of U.S. Treasury securities. A measure of performance for that market is in the black for the month of September and the third quarter. The more popular Lehman Government/Credit index, which is a benchmark for diversified bond portfolios returned -2.54% in September, -1.64% in the third quarter and -0.67% for the year-to-date period.
• More major financial events occurred in September than in most decades. Bankruptcies, bailouts, conservatorships and takeovers have become popular words in our vocabulary. Investment banks such as Merrill Lynch, Goldman Sachs and Morgan Stanley changed their business models in response to investor avoidance of risk. Lehman Brothers was not quite fast enough. It declared bankruptcy, which triggered new waves of fear in the financial markets.
• These waves of fear have affected the credit markets, which has in turn affected our economy. Although GDP was revised to show a +2.8% rate of growth for the second quarter, that growth has slowed dramatically. Growth has abruptly slowed overseas as well.
• Financing is difficult to obtain for business, which makes employment and investment decisions easy to postpone. Indeed, the September employment report indicated a loss of 159,000 jobs.
• All of this news is lighting a fire in Washington, D.C. Most free-market proponents cringe at the thought of government intervention. These are unusual times, however, and the strength of the U.S. government is needed to stop the spiral of panic. Fortunately, Congress responded to the leadership of U.S. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. These leaders have been able to unite global financial leaders in an effort to inject liquidity into our markets in a massive show of strength.

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The trust and investment services described are provided by Associated Trust Company, NA. Investment management services are provided to Associated Trust Company by Associated Investment Management, LLC. All are affiliates of Associated Banc-Corp.

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