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Market Volatility Underscores Value of Professional Advice
September 19, 2008
The capital markets have been severely shaken over the past few weeks as news of major events in the financial services industry put further pressure on the broader investment landscape. Investors—already beleaguered by the collapse of the U.S. residential housing market, a tumultuous credit environment, waning economic growth, rising unemployment, and volatile equity prices—were confronted with more alarming headlines about some of the biggest names on Wall Street.
These recent events signify a continued re-pricing of risk across global financial markets. We are witnessing the fallout of a prolonged period of easy credit, loose lending standards, and bubbling asset values. We are in the midst of the largest de-leveraging process that our country has ever faced.
Where do we go from here? Economic and corporate profit growth have slowed to recession-like levels as the U.S. consumer (who is typically the largest contributor to Gross Domestic Product growth) faces the prospect of unemployment and a tapped-out credit line resulting from deteriorating home values. We at Lockwood Capital Management continue to believe that the U.S. housing market's stabilization—and eventual recovery—remains the key catalyst to a rebound in global growth prospects. However, we also expect mergers and acquisitions, corporate buy backs, and IPO activity to remain stagnant given the current lending environment, and continue to believe that Wall Street's earnings expectations for 2008 and 2009 remain lofty and overly optimistic.
Times like these, while unsettling, provide the opportunity for investment professionals to be of tremendous service to their clients. Although there are very few places to hide in the short term, the fundamentals of asset management remain unchanged. The need for professional financial advice and a disciplined approach to portfolio management have been reinforced by the recent instability of the global markets. While we anticipate that these recent events are not the last of the "bad news" to come out of the capital markets, we are encouraged by the long-term prospects of the investing landscape, and continue to believe that maintaining a well-diversified portfolio, managed with a long-term perspective, is the key to achieving clients' investment goals.
Don Robinson
Chief Investment Officer, Lockwood Capital Management, Inc.
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Lockwood Capital Management, Inc. (LCM) is an SEC Registered Investment Adviser and an affiliate of Lockwood Advisors, Inc. and Pershing LLC, all subsidiaries of The Bank of New York Mellon Corporation. Pershing LLC, member FINRA, NYSE, SIPC.
The statements contained herein are based upon the opinions of LCM and the data available at the time of publication and are subject to change at any time without notice. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by LCM or its affiliates to buy or sell any security or investment. This communication is for informational purposes only, and is not intended to meet the objectives or suitability requirements of any specific individual or account. Diversification and strategic asset allocation do not guarantee a profit nor protect against loss in declining markets. For more information about LCM, as well as its programs, fees, and services, please refer to the ADV Part II, Schedule H, which may be obtained through your financial advisor or by writing to LCM at: 10 Valley Stream Parkway, Malvern, PA 19355, or by calling 800-200-3033. This document is reprinted in its entirety with permission from LCM.