I’m going to be out of the office tomorrow, so my report on the markets is a day early. It will be brief as well, because there really isn’t much to say. The economic picture is fairly stagnant right now.

I think I can shed some light on the situation with a chart. Below you can see the how the three major indices have performed this year. While these indices have a high level of correlation, there is normally still some separation in their performances and the chart shows that normal distance among the three in the early part of 2008. As the chart clearly shows, however, since the beginning of June, the Nasdaq, Dow and S&P 500 have moved in a virtual lock step.

Another thing the chart clearly shows is that each of these indexes has given up a significant amount so far this year. Since peaking in October 2007, major indices are off more than 20%. If the chart went back far enough, you could see that the pattern since October bears a strong resemblance to 2002.

I wish I could provide some encouraging reasons to show that we are near the end of the current bear cycle. Unfortunately, economic fundamentals appear to be losing ground instead of improving. Staying on the sidelines in cash remains the wisest course of action for most investors.
F.S.