2008: CoreStates Second Quarter Commentary

The Economy: Many people believe that the US economy has entered a recession. The technical measurement of a recession is two consecutive quarters of the Gross Domestic Product showing negative numbers. A recession has not been indicated by this measurement. However, we have experienced three consecutive months of negative net job growth, the dollar continues its decline while commodities, food and fuel prices continue their upward spiral. What does this mean in terms of a recession? While consumers are forced to put more dollars into food and fuel, one must ask, what other elements of their spending patterns will suffer and how will this affect the economy?

The once robust housing market remains stagnant. Credit and liquidity problems continue their drag on the domestic stock markets. Corporate earnings for the first two quarters of 2008, by most measures, have been disappointing; leaving investors with a less than enthusiastic feeling. The consumer drives our economy and there is little that can be done from governmental action to change the economy in the short term.

The Markets: The S&P 500 index has dropped 12.8% since January 1, 2008 and is off of its high on October 11, 2007 by 18.8%. Are we in a “Bear Market?” The technical definition of a Bear Market is a 20% decline from a prior high; it appears the bear may be knocking at the door, causing many to ask…”How do I preserve my wealth and, where are the opportunities?”

The CoreStates Strategy: With prudence and discipline, capital can be preserved in a Bear Market. In addition, opportunities are created by market movements as stock evaluations become more reasonable.

CoreStates long-term investment strategy takes into account these “ups and downs” in equity valuations and market trends. Our investment models are designed to protect and grow assets through the good, the bad and yes, sometimes the ugly! Our belief in business sector allocation, broad diversity of investments and our global approach to investing are sound and designed to minimize loss of capital yet, provide opportunities to enhance returns.