Year-to-Date Performance

June 2004

The Dow Jones Stock Index began the year at 10,453 and as of Tuesday, June 8, 2004, it sat at 10,432. We thought you might like some information that could put this year-to-date lackluster performance into perspective.

US Economic Indicators — The long-awaited economic recovery finally appears to be gaining momentum:

• US Gross Domestic Product grew by an annual rate of 4.4% in the first quarter of this year, slightly faster than the 4.2% previously estimated by the Commerce Department. The economy grew 5% over the past four quarters, reflecting the fastest growth in 20 years.¹

• US consumer confidence held steady, reflected by a slight increase from 93 in April to 93.2 in May, according to the Conference Board.¹

• Job Growth: The nation's employers added 248,000 jobs in May, bringing the total so far this year to nearly 1.2 million, reversing a troubling three-year trend of job losses that continued long after the recession ended in late 2001. “These blowout numbers so far this year are the convincing evidence that the economic recovery is here to stay,” Wells Fargo chief economist Sung Won Sohn said. After the long jobless recovery, the job growth so far this year has been “pretty spectacular compared to what we were expecting,” he stated..

Interest Rate Hikes — A common assumption is that stocks will struggle in a rising interest rate environment. While this notion is true in certain circumstances, it may not necessarily be the case. The Fed raised rates five times in 1988, but the NASDAQ rallied about 15% for the year and 19% in 1989. The S & P 500 Index rallied 12.4% in 1988 and 27.3% in 1989. Additionally, from February 1994 to February 1995, the Fed increased rates by 300 basis points, with the NASDAQ returning a whopping 40% in 1995. S& P 500 Index was up 37.5% in 1995.²

Economic Fundamentals — Because economic fundamentals remain strong, demand for products and services is not likely to drop off because of the several 25-basis-point rate hikes that are expected ³. Remember why the Fed looks to be on the verge of raising rates – the US economic picture looks good to say the least, with virtually all indicators pointing to further growth.

¹ - Source: Commerce Department

² - Source: U.S. Federal Reserve

³ - Consensus View