Even with the powerful 3-month rally the "dumb" indexes still have to about double in value to get back to pre-recession levels. Investors cannot directly invest in indices. Past performance does not guarantee future results. Of course we do not recommend just index returns but funds that have historically consistently outperformed the "dumb" indexes or ETFs with positive Alpha (out performance vs. risk taken). We are concerned about some sectors that may be ahead of the economic fundamentals and recommend sectors which we believe have the best continuing recovery potential at this point in the economic/investment cycle.

Among growing good news was that U.S. corporate profits were reported to have risen in the 1^st quarter – the first increase in almost two years. The Consumer Confidence Index soared with the biggest gain in 6 years, along with a better than expected uptick in the Univ of Michigan Consumer Sentiment Index. Even with expected continuing job losses, confidence is back to pre-crisis levels. Capital markets are responding positively to colossal monetary and fiscal stimulus. Durable-goods orders jumped much higher than expected. The latest report on the leading economic indicators grew for the first time since June 2008, another good sign.

But there are still uncertainties. I suggest strategies both to maximize the recovery potential as well as "participate yet protect" strategies for the next market downturn. I continue to recommend alternatives without equity or bond market risks. I provide detailed updates to keep clients informed of often rapidly changing economic and investment outlooks. I continue to be very proactive, suggesting changes as warranted to take charge of investment opportunities - not be a victim of static allocations and models.

He polled the best seven timers whose timing advice had beaten the market in each of the last two bear markets as well as the intervening bull markets. Of nearly 200 newsletters tracked only seven met those requirements.

All seven are now bullish. Sample outlooks:

"Stocks currently in the ‘Very Undervalued’ category -- far more undervalued, in fact, than they have been at any point in the last three decades."

(Since the market low) "We have been in the early stages of a cyclical bull market which should carry into next year and generate large percentage gains for the major indexes."

Mark Hulbert concludes, "The bottom line? Each of these top timers is at least moderately bullish. Their average recommended domestic equity exposure is 91%."

Article compares the current recovery to that of previous recoveries and concludes: "Extreme declines are likely to give way to broad recoveries. After large and prolonged declines, investors can earn high returns, even if they miss the first leg of a recovery. In other words, it’s not too late to get back into stocks."

Mark Zandi, senior economist at Moody’s says of economic recovery: "China will lead the way, followed by the United States" Source InvestmentNews 5/21/09

While not expected to recover as soon as the U.S. and China, there are growing signs that the worst of the financial turmoil has passed globally. Europe’s manufacturing and service industries shrank in May at the slowest pace in eight months. Bank of Japan Governor Masaaki Shirakawa said the world's second-largest economy is emerging from "free fall," after the central bank raised its outlook for the economy for the first time in almost three years.

70% of money managers now expect improvement in world economies within the next 12 months and are now putting their money to work in the stock market. The outlook is much improved from last October, when 60% forecasted a worsening outlook. Source Money Management Executive 5/21/09

For many months it has been expected that unemployment will peak at 10% or more in early 2011. This is even more likely with the layoffs in the auto industry. Sadly for many, employment historically only rebounds after the economy has seen a strong recovery.

While 10% is terrible for millions of Americans and is a serious issue, 90% are employed and consumer spending may rebound soon, which is one of the major engines of growth for the U.S. economy.

PIMCO’s CEO Mohamed El-Erian has summarized what many market analysts are saying:

"The U.K. could be stuck in a low growth world, but with greater vulnerability to domestic and/or external financial instability.

Core Europe will also grow slowly, influenced by its historical inflation phobia and concerns for the integrity of the European Union.

Japan will continue to face growth headwinds as its economy is too encumbered by fiscal and demographic issues.

Emerging¹ economies will bifurcate more clearly into two groups. Those with weak conditions will alternate between austerity and financial instability; those with strong conditions will maintain their breakout phase, albeit not at the torrid pace of recent years."

Highlights of Money Magazine June 2009

U.S. stocks are cheaper than they’ve been for decades, but steeper drops overseas have stock managers looking abroad for even greater values.

Using Money’s political/economic risk meter, the U.S. is the safest bet for the economy to recover before the rest of the world.

Western Europe sells at a deeper discount but with plunging exports, business activity is expected to lag the world.

Japan is trading at a huge bear market discount but it also has the deepest recession among the G-7 countries.

BusinessWeek 5/25/09 shows that the corporate earnings decline in the U.S. of 23% is the lowest decline of all major markets. Japan had a 78% decline, Britain 59%, Germany 56%, France 39% and China 29%.

The views and opinions expressed by Dave Hutchison, CFP are as of the date of the report, and are subject to change at any time based upon market or other conditions. The material contained herein is for informational purposes only and should not be construed as investment advice, since recommendations will vary based on a client’s goals and objectives. Information is believed to be from reliable sources; however, no representation is made as to its accuracy. All economic and performance information is historical and not indicative of future results. Please consult one of our financial advisors for more information. Hutchison Investment Advisors, Inc. is an Arizona registered investment advisor. Part II of Form ADV (Disclosure Statement) has been given advisory clients and is available upon request and is at www.davecfp.com