INVESTMENT NEWSLETTER
June 2009

Recovery Rally

Stocks continued strong in May, with the broad market S&P 500 up 5.6%, bringing the index into the black for the year. The DJIA gained 4.4%, Nasdaq 3.3%, and small-caps as measured by the Russell 2000, 3%.

Markets around the world enjoyed the third consecutive month of gains, their longest winning streak since August 2007, as investors increasingly believe that the worst of the financial crisis may be over and the global recession might be nearing an end.

Since hitting 12-year lows in early March, the DJIA is up 30%, the S&P 500 36% and the Nasdaq 40%. Foreign markets, especially those of developing countries like India and Russia, have rallied more sharply than the U.S. The MSCI Emerging Markets index is up 57% since March 9, and the MSCI EAFE index of developedcountry stocks is up 42%.

Commodity prices, one gauge of economic revival, saw their strongest gains in years with oil, gold and natural resource prices surging.

In economic news, consumer confidence jumped as personal income unexpectedly increased. At the same time, personal spending fell by less than consensus estimates and business spending showed signs of rebounding. Separately, construction spending perked up last month and new data suggested the manufacturing sector was in better shape than expected.

Domestically, large-cap funds outperformed mid and small-cap in all style categories last month, while value funds were stronger than growth funds in all size categories. Among sectors, financials and energy led. Gold and natural resource funds flew last month, surging 30% and 16%, respectively. Health care funds recovered nicely and technology and telecom funds continue rising up the ranks.

International Resurgence
A year ago internationals were scarce among the top ranks, but their absence proved to be short lived.
Comparing the long term history of developed foreign markets to our own, the records are practically identical. European and U.S. markets have both returned about 10% over their entire histories. But these long-term records are comprised of many periods of over and underperformance that are easy to identify in hindsight.

Focus on the Process
Keep in mind that in real-time, market leadership may not be evident. In July 2005, for example, we couldn't have known that international funds would soon come to dominate, just as today, we don't know how long this month's international funds will remain highly ranked.

It's tempting to look at Upgrading's outperformance and think that every trade was profitable, or that the ranks were always in sync with the market.

But short term frustrations are to be expected when Upgrading. Not every trade will add value. Sometimes we will buy a fund only to see it quickly drop in the ranks, or sell a fund only to watch it come back up into the Buys. Upgrading may not always keep pace with the current leading funds or indexes (or even the benchmark S&P 500 Index). In fact, we've found that when measured on a monthly basis, Upgrading only outpaced the S&P 500 Index about 55% of the time. But over time, it works.

We hope this example of how the system works gives you the conviction to participate in Upgrading's long-term success, to focus on the process rather than the outcome of each trade, and work to align your portfolio with the prevailing market trend. Ultimately the cumulative results are very rewarding.

Thank You for your trust and continued support!

Sincerely,

P. Michael Valley II
Estate Planning Professionals