CoreStates Economic Survey

Last quarter, we sent out an email inviting all CoreStates clients to participate in an Economic Survey. We asked you to go to our website and give us your opinion on several important segments of our economy. We asked if you thought these key economic indicators would increase, decrease or remain unchanged over the next six months. Here are the results from a terrific cross-section of our client base. Thank you everyone who participated.



66% of the respondents felt that the stock market would improve over the next six months, while 80% thought oil prices would increase. 64% of respondents think the unemployment rate will increase with 42% seeing lower home values. 58% are predicting higher inflation most likely led by the cost of medical insurance (78%), increased government spending (86%) and the declining value of the dollar. 56% of those surveyed think the income taxes will increase over the next six months. 51% think that the consumer confidence will improve and 39% believe the automobile sales will increase.

We hope that you will compare your responses to those individuals who participated in the survey. Keep in mind this is not a scientific survey. We just wanted to provide a forum for people to tell us what they thought. Please look for more investor surveys in future newsletters. We greatly appreciate your involvement in making CoreStates a special place.

The Top Ten Reasons to use CoreStates

CoreStates Capital Advisors provides financial advice to individual and institutional investors - just like hundreds of other firms. But, what distinguishes CoreStates is how we have redesigned the financial advisory service for the 21st Century investor.

1. Mutual commitment
CoreStates Capital Advisors, as a Registered Investment Advisor, bears fiduciary responsibility to act only in our clients' best interests. Your success is our primary goal. Registered Representatives represent their employers, typically purveyors of financial products, and are required only to assure that those products are "suitable" before promoting them to clients.

2. Unsurpassed understanding of you
At CoreStates, we won't even try to serve you until we truly know you, and until you know yourself. So, we provide the industry's most comprehensive investor profile, which we call our Investor DNA. You complete a questionnaire online and immediately receive a five-page analysis of your investment traits and preferences.

3. Thorough analysis of your needs and goals
With your current assets and the additional income you anticipate, will you be able to live the life you desire? The CoreStates Cash Flow Analysis will provide unique insights into your financial future, helping you make sound financial decisions and providing us with the information we need to serve you effectively.

4. We document your expectations
A personalized Investment Policy Statement is offered to each client. This document describes the mutually agreed upon processes and guidelines for the management of your account. It specifies your investment objectives, time horizons, risk parameters, investment style and communication preferences. It defines how we will serve you in the pursuit of your desired investment objectives.

5. A foundation of sound strategic perspectives
CoreStates' investment strategies are based upon a comprehensive ongoing review of the global investment environment that we call our 20/20 Global Vision. No one knows what the future holds. Yet, no one should invest without first carefully considering and evaluating the most important factors likely to drive the investment markets of the future. These proprietary perspectives are reflected in the management of all CoreStates client accounts.

6. Complete objectivity
It is extremely difficult for an investor to confront the peaks and valleys of a turbulent market and keep their emotions under control. With over 135 years of total experience, CoreStates' decision-makers have lived through and learned from virtually every market fluctuation. We have the unemotional objectivity needed to make the right decisions.

7. Full power portfolios
The New World of asset allocation goes well beyond the traditional stocks/bonds/cash/real estate portfolios by including four new asset classes and strategies. This Eight-Cylinder Portfolio model provides twice the return-generating opportunities while also incorporating truly low-correlation diversifiers to more effectively moderate portfolio variability.

8. Unbiased investment selection
We do not represent a mutual fund company, a specific money manager, an investment banking company or any other product purveyor. We have the world of investment options at our fingertips. Our freedom to choose the best available investment solution provides almost unlimited possibilities.

9. Total transparency
Paraphrasing former President Regan, trust is safely granted only with verification. We employ unaffiliated custodians to safeguard your assets, independent auditors to monitor our activities, and third party performance analysts to validate our results. Every aspect of your relationship with CoreStates is accessible, transparent, and verifiable. CoreStates offers a robust website that includes access to your account information 24/7. You will know what we are doing, and how, and why. Always.

10. Confidentiality
We restrict access to nonpublic personal information about you to our employees with a legitimate business need for the information. Our employees may access information and provide it to third parties only when completing a transaction at your request or providing our other services to you.

CoreStates 2009 Q2 Review & Outlook

The April through June period saw stocks continue their bounce from early-March lows. By quarter’s end, the advance had begun to falter, but not before adding another 12% of gains for the Dow Industrials, cutting their year-to-date decline to about -2%. International developed economies saw their markets advance some 15% (MSCI EAFE) and reach a year-to-date positive return of about 3%.

Encouraging as these numbers are, even they don’t fully represent the resurgence of investor enthusiasm as the quarter’s economic measures began to indicate a moderation in the rate of national and worldwide economic decline. This growing perception led to sharp rebounds in the more speculative areas of the markets, with small capitalization US stocks (Russell 2000) advancing nearly 21% and reaching positive territory for the year. The NASDAQ gained 20%, bringing its year-to-date gain to over 16%. Emerging nations’ stock markets were even stronger, averaging gains of 25% for the quarter and year-to-date. The dollar also reflected the moderation of concerns for the US economy, adding another 10% to the returns of the average US investor in foreign markets.

Improving economic prospects were also noted by bond investors, as were the heightened prospects for inflation resulting from the burgeoning Federal deficits. This served to elevate yields on the 10-year Treasury from 3% at the beginning of the quarter to about 3.5%. Other areas of the bond market generally benefitted from diminishing credit quality concerns, offsetting the modest rise in interest rates on Treasury securities and holding yields generally steady.

Commodities prices also reflected growing investor confidence in recovery and fears of inflation, as broad commodities indexes advanced in the area of 15% for the quarter. Crude oil led the way, gaining more than 40% in a May-June surge from $52 to $72 per barrel. Precious metals also moved higher with gold, for instance, gaining nearly 7%.

So, is the perfect economic storm finally weakening and clear sailing ahead? We at CoreStates believe the worst of the financial crisis is over, but we see three areas of likely investor misperceptions. We believe investors are early with their enthusiasm for economic recovery, are probably equally early regarding their fears of imminent, rapidly increasing inflation, but are also too sanguine regarding the longer term implications of the sea change taking place in the core of our economic system.

In our view, a slower-than-expected recovery is likely to produce at least a few months of disappointing economic measures near term, which should also defer the inevitable inflationary effects of current fiscal and monetary policies. These countervailing factors should keep most markets quite volatile, but largely within their recent trading ranges. The greater concern for prudent investors is the eventual impact of the massive increase in the role of the Federal government in our economy, and the reduced incentives to the private sector from ever-higher taxes on our most productive enterprises and individuals and ever-broader social programs for the less productive. And, this is before the impact of a national health plan, vast changes in social security, or the remaking of our public educational system.

Our governmental structure was designed with several checks and balances, a key one of which is the requirement for a 60% majority in the Senate to be assured of passing key legislation. The expectation of our founding fathers was that, to reach this level, legislation would have to be tempered by a wide cross-section of political viewpoints. Today’s Democrat super-majority, led by a President many consider the most anti-business in our history, creates a level of uncertainty for investors that is unprecedented. Although we maintain our long-held belief that it is unwise to bet against the resilience of the US economy, we also believe it is imperative in the current environment to spread those bets widely, maintain a sizeable cushion of liquidity, and be prepared to react decisively as our new economic reality takes shape.