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Capital Markets Commentary
April 18, 2008

In the first quarter of 2008, there were some headwinds – decelerating earnings, a sagging housing market, and asset write-downs among major financial institutions – that negatively impacted the returns of the major benchmarks. The Standard & Poor’s 500 Index returned -9.5%, the tech-heavy NASDAQ Composite returned -14.1%, and the Dow Jones Industrial Average returned -7.0%.

As we begin the second quarter, many believe that the U.S. economy is likely in a recession, as a result of lower household consumption precipitated by higher food and energy costs, continued housing market difficulties, a broader slowdown in economic activity, tougher credit standards, and softening job growth.

The Federal Reserve has continued its aggressive moves to restore confidence and liquidity in the fixed income markets. The Fed cut the fed funds rate an additional 200 basis points (from 4.25% to 2.25%) during the quarter and introduced additional liquidity measures, reflecting its continuing concerns that tight credit and difficult housing market conditions might impact the broader economy.

U.S. bonds were among the few segments in positive territory for the quarter, with the Lehman Brothers Aggregate Index rising 2.2%, led higher by U.S. Treasury and Agency securities, which benefited from a flight to quality.

Investing is a long-term effort and markets and economies are often very tumultuous in the short run. Volatility is normal and expected. In this environment, we believe that the worst possible course of action would be to give in to growing fears in the market and sell. It is nearly impossible to predict “tops” and “bottoms” in a market cycle. In our opinion, the better approach for long-term investors (those who do not need access to their investments for more than three years) would be to reevaluate strategic asset allocation and, as necessary, rebalance the portfolio back to a long-term objective.

While we view the current environment as challenging, we remain focused on the factors that we believe drive long-term security prices: valuation, corporate earnings growth, real economic growth, and the overall level of interest rates.

If there have been changes to your financial situation or your personal goals and objectives, you should contact your advisor. During difficult market conditions it is extremely critical that your strategic asset allocation properly reflect your current goals and objectives.

As always, please contact your advisor with any questions or concerns.

Sources: Thomson Financial/Vestek Systems, Lehman Brothers, MSCI Barra, Lockwood Capital Management