The markets surged to new recovery highs…


The markets surged to new recovery highs fueled by strong earnings reports and a jump in consumer confidence. The Dow Jones Industrial Average, S&P 500, and NASDAQ all ended the week at their highs with the Dow and S&P extending their winning streaks to eight weeks in a row. For the week, the Dow gained 142 points (+1.36%) and closed at 10600. The NASDAQ composite, which toyed with the 2100 resistance area for several days, broke out on Wednesday as it gained 15.57 points to close at 2111.13. For the week the index gained 54 points (+2.59%) and closed at 2140.

Earnings season officially begins this week with Citigroup, 3M, Johnson & Johnson, United Technologies and GM scheduled to announce results Tuesday. All technical indicators are either neutral or bullish, leaving in place the bullish trend from 2003. For the week ending January 14th, U.S. equity mutual funds had strong inflows of $5.7 billion compared to inflows of $3.8 billion the previous week. U.S. Equity funds have now had positive inflows for eight months in a row.


No changes to our models once again as the positive trend has successfully carried over from 2003. We continue to position clients assertively with a focus on equities over bonds, and very little cash. This allocation is prudent for a rising stock market, and an environment in which corporate earnings are rising, interest rates are at 45 year lows, and large institutional investors are generally supportive of equities.

My wife and I recently undertook what will prove to be an exciting endeavor: renovating an 1896 historic home near downtown Appleton. The Queen Anne Victorian has been lovingly ignored over the past fifteen years, which is to say it needs some careful updating. Amid the pounding of sledgehammers over the past weekend, my thoughts turned to work, and it dawned on me that the same “renovation” that I had applied to a portfolio management process two years ago was being implemented to our updated bathroom. We’re keeping much of the same structure (joists, flooring, layout, etc.) but were using materials that are simply more durable, efficient and safer. Plastered slats are being replaced with drywall, knob and tube electrical is being replaced with insulated wire, and lead pipes are carefully removed in favor of modern flexible tubing. All serve the same purpose as the old materials, but I’ll sleep better at night knowing that there’s a greatly reduced risk of fire, broken pipes and frostbite!

Our wealth management process has also taken a time tested structures (the secondary markets and free market capitalism) and layered on them significant improvements. These improvements include better tools (iShares and no-load mutual funds), better risk management (through tactical asset allocation), and better firm structure (smaller, more responsive, local control). I thank my clients for making this experience possible, and my wife and I will happily open our doors to you when the project is completed!


In his annual State of the Union speech Tuesday night, President Bush will likely spend time trumpeting the recent strength of the U.S. economy, and he will also float several new economic policy proposals. In the process, he is likely to draw criticism from Republicans and Democrats alike. Here’s a preview of what to expect:

Extended Tax Cuts: President Bush will likely continue this call to make the tax cuts passed in 2001 – 2003 permanent, or at least to extend them well into the current decade. The congressional Budget Office estimates that the accumulated Federal deficit in 2013 would be a manageable $1.4 trillion. The Brookings institute and Goldman Sachs (among others) argues that if the tax cuts are made permanent, the deficit could swell to an additional $5 trillion.

Immigration: President Bush will continue to call for the granting of temporary worker status to millions of illegal aliens. Republicans fear this will lead to a flood of immigrants straining social programs and increasing crime; Democrats believe excess workers will slow down wage growth and cost higher wage earners their jobs.

Health Care: The President will call for making certain health care items tax deductible and offering assistance to the uninsured.

Social Security Privatization: President Bush will use the recent stock market run as a backdrop for privatizing social security, allowing workers to “self-direct” a portion of their Federal retirement accounts. However, given the inherent risks associated with removing a social safety net, Democrats and Republicans alike will probably balk at this proposal.

By | 2004-01-19T13:30:29+00:00 January 19th, 2004|Market and Portfolio Commentary|Comments Off on The markets surged to new recovery highs…

About the Author:

Mark’s commitment to objective, independent wealth management led him to establish The Appleton Group LLC in April of 2002. With over 19 years of experience in the financial services industry, Mark serves as portfolio manager for our private client group, and co-manages all assets held in our suite of portfolio offerings. His responsibilities include risk analysis, asset allocation, market research, and institutional client development. Mark also serves as both Principal and CEO of The Appleton Group LLC. He earned his Accredited Investment Fiduciary (AIF) designation in 2016