Returns Keep Pace In Changing Markets, (NAPSA)—Investors looking for growth of capital and income may want to consider increasing their allocation to stocks, advises the team of investment professionals from Eaton Vance Corp. Seventeen rate hikes over nearly three years have led to a situation where bond investors are paid more for owning short-term bonds than longer-term ones. This somewhat unusualsitu- ation creates a dilemma, and investors may want to add to stock holdings to help the return prospects of their investment portfolios, explained Duncan W. Richardson, chief equity invest- mentofficer at Eaton Vance. Over the past two and a half decades, interest rates have decreased steadily as globalization and technology have combined to keep secular inflation in check. Richardson expects interest rates to stay in their current 4 to 5 per- cent range for an extended period. Bonds mayreturn only half of their relatively healthy historical returns over the past several decades. He also anticipates that yields on cash (such as bank certificates of deposit), which are currently around 5 percent, may also not be so attractive in a yearor two. “Although the direction of the economy is uncertain, increasing stock and bond marketvolatility, the delayed effects of rate hikes and higher commodity costs could cause an economic slowdown along with a deceleration of corporate earnings,” Richardson said. “We believe this environment may result in potential changes in market leadership, making it ideal for investors who have an ability to sort out industry and company fundamentals on a stock-by-stock basis.” The good news is some stocks are relatively inexpensive and may even provide a competitive source of income compared to bonds. The averageprice/earnings (P/E) ratio, a common measure of the relative value of stocks, has compressed from about 25 to 15. Richardson feels the uncertainty has depressed multiples and predicts that the P/E ratio of the S&P 500 will remain steady and may even expand onceit is clear the economy is slowing. Stocks can provide significant capital appreciation to longer-term investors that bonds may no longer be able to offer. Additionally, with some corporations returning more cash to shareholders, equity investors might potentially receive a rising source of dividend income thatis tax-advantaged through 2010. permit S&P earnings to continue to increase over the next several years. “Growth and value investors should find the valuation and volatility of the equity market, especially the larger stocks, to be tolerable over the next three to five years,” Richardson believes. “The stock market should return to its historic performance range of 7 to 8 percent, so we believe every investor—whether conservative, moderate or aggressive— may benefit by significantly increasing their exposure to stocks.” Eaton Vance Corp. is a Boston- based investment management firm whose stock trades on the New York Stock Exchange under the symbol EV. Eaton Vance and its affiliates managed over $135.5 billion in assets as of January 31, 2007, for more than 100 investment companies, as well as individual and institutional accounts, including those of corporations, Corporate earnings of S&P 500 companies are currently at record levels—double what they were in hospitals, retirement plans, universities, foundations and trusts. The stocks listed on the Standard Fund’s investment objectives, risks, charges and expenses. The Fund’s current prospectus contains this and other information about the Fund and is available 2002—providing good fundamental support to the stock market. & Poor’s 500 Index generate nearly $90 of high-quality earnings per share. Mr. Richardson believes that higher-quality is largely a result of Sarbanes-Oxley (SARBOX) legislation that was passed in 2002 with provisions for improved corporate governance. Richardson also believes that improved SARBOX controls may Before investing in any Eaton Vance Fund, prospective investors should consider carefully the through your financial advisor. Read the prospectus carefully before you invest or send money. Eaton Vance Distributors, Inc., The Eaton Vance Building, 255 State Street, Boston, MA 02109.
