Happy New Year!

This is the New Year we talked about during the old year! The old year was unkind to almost all asset classes. It did start to redeem itself late in the year with interest rates declining and stocks rising a bit. The nicest thing that I noticed was that after my blog on December 19th, both the core and high-yield bond values continued to increase as interest rates continued to drop. At this writing we have seen the core interest rate go from 7.22% on December 19th to 6.33% on January 6th. That is good for bond values. In addition, the interest rate on high yield bonds has gone from 21.65% down to 16.21%. What this seems to be telling us is that the fear in the credit markets is beginning to subside and investors are becoming more rational about prices. In a similar fashion, we are seeing a fairly stable trading range in most of the stock market indices since December 16th with no real significant changes. This appears due, in large measure, to the lack of sellers (supply) rather than strong buying (demand). As long as the sellers are unwilling to sell at current prices, this is fine! This will not, however, move the market up very much. The key to bringing this market up is greater demand for stocks.