Mark Levy’s Economic Update – December 05, 2011 At the time of this writing, The Dow 30 Industrial Average is at 12,157, up 140 points on the day. This follows a big up week last week – one of the biggest in history. Let’s be honest though, this good performance is after an equally negative period in the prior 2 weeks before the rally. We are simply being pushed and pulled by market volatility and in reality, the equity markets are generally trading in a range. The high of the range for the Dow is near the current value, around 12,200, and the lows have been in the 11,000 area. The reason for the price movement between the two areas is straight forward, in my opinion. The equity markets rally when European woes look better and the fundamentals of our own markets (good earnings reports of late) become the dominant force. Or, the equity markets decline when European woes begin to look insurmountable and our markets decline in the face of possible debt collapse in the weaker Euro Zone participants. So, which trend will win? We believe that the Euro Zone efforts to enact austerity in the countries that need it and the perseverance of Merkel from Germany and Sarkozy from France to create a new, tougher Euro Zone treaty, will win out. It will take time and it will not be a straight line of success. If European confidence however, can slowly be rebuilt, the news of our own improving economy may start to be heard. This past Thanksgiving weekend was a blockbuster for retailers and nearly every S&P 500 company has reported 3rd quarter earnings results with 70% beating estimates. This reflects a strong 18% earnings growth from a year ago. We all know more volatility may come. We have positioned portfolios to hold diversified equities, high yield corporate bonds, cash and a limited exposure to European stocks and long term bonds. We believe this is the best allocation for our investments at his time. It will take years for the Europeans to resolve their debt crisis, along with our own subprime mortgage debt and housing problems, but stabilizing these problems can allow markets and economies to heal and move forward. Key reports coming up this week for the United States is the November reading on service sector ISM, the latest weekly reading on chain store sales (as the holiday season swings into high gear), and the October merchandise trade report. There are only a scattering of Fed officials slated to speak ahead of the next Federal Open Market Committee meeting next week. Lastly, China’s economic data for November will begin to be reported late this week. We wish you a happy holiday season – Mark The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal. LPL Financial Research dated 12/5/2011and Hays Advisory Market Comment dated 11/30/2011.