Minds Over Moods (NAPSA)—Acynic, when asked the difference between an optimist and a pessimist, responds, “The pessimist knows more.” Not neces- U.S. Market Recovery after Tragedy Cumulative return of the S&P 500 after tragic events sarily, say experts on economics. “Investors are currently facing one of the most chaotic markets of this century,” said Duncan W. Richardson, Chief Equity Strategist of Eaton Vance Management. “The existing pre-attack economic uncertainty has been magnified over the last month and we have new concerns about our physical safety and jobs. Now is the time for our minds, not our moods to drive our investment decisions. If we step back from the tragic events of September 11th and view the underpinnings of our stock market, many positives emerge.” The Fed has lowered rates faster and to a greater degree than in any pointin its history, including the 1987 crash and the Long Term Capital debacle. Stimulusis in the pipeline, there is room for further actions and the Fed appears ready to do whatever is necessary to rescue the economy. This is extremely positive for stocks. A previously divided partisan government has united in the wakeof the September 11th disaster in a way America hasn’t since Pearl Harbor. Congress so far has given the President the money he seeks. Security forces will be built up, infrastructures will be repaired, and the transportation system will be bailed out. While potentially inflationary, inflation is well down on our worrylist. This short-term increase in gov- ernment spending should be stimulative to the economy while offsetting some of the slowdown in the consumer. This crisis has occurred well along in a bear market whose duration and decline had already reached or exceeded most historical precedents. Risk taking over the past 18 months has been unrewarding, to put it mildly. 1.6% =1.0% 20.896 8).4% Dec. 7, 1941 Pearl Harbor 26% 114% 184% a 20.9% Nov. 22, 1963 President Kennedy assassinated is a minimum. Reposition your a 57.7% Aug. 2, 1990 Iraq invades Kuwait planning now can save taxes in sions on asset allocation, sectors and individual stocks generally prove to be wrong.” “Successful investment comes from properly assessing risks and NN 56.6% Feb. 26, 1993 World Trade Center bombed 20 assets in accordance with that plan. Take losses where appropriate to offset future gains. Tax the future. Remember, rash, emotionally driven investment deci- ZLN G.1% 8.3% 0 put together a written investment plan based on realistic goals and time horizon—three to five years A,% 15.9% 26.9% -20 yielding approximately three percent. A three percent rate of return in a taxable account means that after taxes and inflation, investors are losing money. Sooner or later much of this money will move to the equity markets from which it fled over the last 18 months. This is extremely positive for stocks. “In our mind, with all of these positives, the probability for successful equity market participation is high,” stated Mr. Richardson. “Optimists armed with a realistic plan for taking market risks should be well rewarded. To take advantage of today’s market, sit down with your advisor and 40 60 rewards,” he continued. “Our 80 After | month After 1 year After 6 months After 3 years Source: 2001 Thorton Associates. This chart is intended for comparative purposes only and is not indicative of any investment. Past performance is no guarantee of future results. While downturns are always part of the equity experience, few were prepared for the speed and severity of the decline of the speculative bubble created in the late ‘90s. Valuation levels are increasingly attractive across many market sectors, and sentiment and technical measures were already approaching bearish extremes. Today there is over $2.2 trillion sitting in short-term instruments, mood remains anxious but our mind knows the market will anticipate an economic recovery well before the news headlines are positive. The rewards from equities may not approach the tremendous returns over the last 20 years, but we believe they will be superior to most other asset alternatives.” Eaton Vance Management, a wholly-owned subsidiary of Eaton Vance Corp., and its affiliates manage over $50 billion (as of September 30, 2001) in assets for more than 70 mutual funds, individuals and various institutional accounts, including those of corporations, hospitals, retirement plans, universities, foundations and trusts.
