Adrian Mastracci, investment counsel at KCM Wealth Management, says “However, let's not forget one important feature about the markets. They are difficult to forecast. Moreover, they can turn on a dime, in either direction, at any moment, with little or no notice and on any piece of news."

For Immediate Release

Vancouver, BC (August 9, 2004): The markets have produced some worthy of note results since January 1, 2003.

Adrian Mastracci, investment counsel at Vancouver’s “fee-only” KCM Wealth Management, comments, “Today’s pressing question for investors is still about the investment expectations for the balance of 2004, and beyond. Especially, in view of the stock price declines of the last few days.”

The Look Back

First, a look back at my newsletter of January 12, 2004. I’ve italicized what I said then:

Well, 2004 is shaping up to be a year of mixed signals. Muddled waters you might say. The case can be made for both the running of the bulls and a sprinkling of the bears. Heaven forbid.

My perspective on what may transpire is two fold. There is a better chance of an improving US economy in 2004. However, there is also a probability of slipping into reduced economic activity.

Job creation will influence the sentiment for the US economy and the markets. It is also entirely possible to experience both a rise and decline in stock prices in 2004. Think of it as a roller coaster.

Accordingly, my 2004 range of expectations for US stocks is a potential upside of 7% to 12% and a potential downside of -10% to -15%.

The Number Crunching

Now let’s picture the results of the major North American markets since January 1, 2003:

These figures indicate that the markets have held up rather well in the face of all the uncertainties of 2004. However, let's put the big picture in perspective.

And, perspective is still what is really needed. Plenty of it. Economics is far from an exact science.

The Approach

First, a few comments about some investing fundamentals:

• Investing is not about making wholesale changes as markets fluctuate one way or another.
• Investing is about trying to achieve a consistent rate of return that will satisfy personal goals, such as a particular retirement income.
• Focusing on day-to-day fluctuations is a mugs game enough to drive anyone around the bend.
• Consider the whole portfolio. For example, the fact that those unexciting bonds have recently gone up in price, while equities declined, has been totally lost in the noise of the day.
• There is good reason why all portfolios ought to contain a variety of diversified asset classes, which not all move in the same direction.
• The fixed income components of a portfolio can cushion the fall of equity components.

The Forward View

The US economy is still the one to watch. The direction that it takes will, to a large degree, influence the other major economies and stock markets. China and Japan also deserve a keen eye.

Investors have a wall of worry. There is both good economic news and other news, and investors are still on edge.

The best guess is that we are entering a period of slower economic growth than earlier expected. Corporate earnings for the next two quarters are predicted at lesser rates than previous quarters.

However, let's not forget one important feature about the markets. They are difficult to forecast. Moreover, they can turn on a dime, in either direction, at any moment, with little or no notice and on any piece of news.

This is where the long-term view of what an investor is trying to achieve really shines. It becomes a safeguard for volatile markets, often smoothing out the rough patches.

Since no one knows for sure how the rest of 2004 will unfold, here are some thoughts:

• Exercise reasonable caution. Refrain from chasing the investment bandwagons of the day.
• Expect some corrections and volatility. Markets have risen a long way since January 1, 2003.
• Pay special attention to things that can be controlled. Such as investment policies, asset mix, risks, level of diversification, investment quality and investment selections.
• Periodically monitor and review the portfolio. Take action, such as rebalancing, when required. Then hold for the long journey.

The Expectations Revisited

This is a tall order. My perspective on the markets from here on is similar to the one at the beginning of 2004. A range from the January 1, 2004 results is still the preferred way of looking at the markets.

The job picture, along with consumer spending and oil prices, will continue to influence the sentiment for the US economy and the markets. The US needs about 150,000 jobs per month to breakeven. The possible impact of the US presidential election is not to be taken lightly.

My 2004 expectations for US stocks remain in the same range. The potential upside is estimated to be up to 10%, while the potential decline is to -15%. I would not be surprised at a roller coaster, with the Nasdaq a little more volatile than this range.

Expect volatility to make frequent appearances on the economic menu. Allow the game plan to adjust as required. Think of it as a constantly changing, mixed bag of optimism and pessimism.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.