MONEYLETTER Hotline January 2009

Welcome to the MONEYLETTER Hotline for January 27, 2009

The thick gloom that has surrounded the market in the past few weeks appears to have dissipated just a bit this week. As we see it, the reason for this is that we are getting more signs that some areas of the market and the economy are either improving or appear to have hit bottom. Not every area by any means, but enough to encourage some investors to step up.

We have been talking about a thawing in the credit markets, a most essential condition for any market recovery. This week we had the huge purchase of Wyeth by Pfizer, a merger that was made possible by banks willing to lend Pfizer $22 billion. The thawing of the credit markets continues.

There were cracks in the gloom on the economic front too. Yes, Monday’s slew of job cuts was depressing. At the same time, existing home sales rose last month. Foreclosed homes had much to do with it, but a sale is a sale, and the overhang of unsold homes dropped noticeably. Also, home price declines appear to have leveled off in November according to the latest survey. The price decline is not getting worse.

These indications – and others like them – are contributing to the better tone in the market so far this week. We believe the stimulus package will sustain the tone. Our view remains that a stock market recovery will be evident over the next 2-3 months.

The Stock Market – The action of the stock market so far this week was very encouraging. The ability of the market to remain steady in the face of the job cut announcements was unexpected. The earnings announcements have been extremely mixed, but here too the market has responded better than to be expected. Finally, there appears to be a begrudging improvement in market sentiment. We expect it to continue.

This column is submitted by Holliston native Brian Kelly on behalf of PRI Financial Advisors.