TrusT Funds Book 2009 - Episcopal Church

Economy and Markets Review
Evidence developed during the final quarter of 2009 that the US economy was emerging from the “Great
Recession” that began in late 2007. Signs of healing in the labor market were especially encouraging.
Although the unemployment rate rose to 10.2% in October, employers cut only 11,000 jobs in
November, which helped bring the unemployment rate back to 10% and raised hopes that outright
growth in employment might resume early in 2010. These improvements in the labor market may have
also helped consumers grow a bit more optimistic; consumer sentiment rose and the yearend holiday
shopping season was generally favorable. Other parts of the economy also appeared to regain their
footing. Manufacturing activity increased, as a weak dollar helped exporters become more competitive
overseas. Home sales and prices continued to recover from lows reached earlier in the year.
Government reports confirmed that the economy had indeed grown in 4Q09.
The biggest concern for 2010 is the pace of the economic recovery. Market performance in 2009 was
driven not only by earnings but also by the expectation of future earnings. Real signs of sustained
economic improvement must emerge in order to propel equity markets higher.
Equities
U.S. stocks turned in a winning year following early weakness. The major stock indexes were close to
their highs for the year as 2009 came to an end. All S&P 500 sectors delivered positive returns for the
year, although financials were negative during 4Q09. The rebound in U.S. equities – a comeback of
historic proportions from a trough in March – provided a welcome relief for investors who suffered
devastating losses in 2008. Since reaching their lows in early March, most major U.S. stock indexes
have rebounded sharply, but they are still well below their 2007 highs.
After slipping early in 4Q09, global stock markets rallied and ended the year with a healthy gain. Many
markets reached their highest levels since the start of the worldwide financial crisis in September 2008.
Worldwide business and consumer confidence levels rose, but they are far below pre-crisis levels,
reflecting fears that the recovery is fragile and could be derailed. Higher levels of confidence prevailed
in emerging markets, which turned in a strong quarterly performance and handily beat developed market
indexes.
Growth and value stocks advanced, but growth outperformed. Small-cap stocks especially benefited
from investors' renewed appetite for risk.
Stocks in emerging markets handily outperformed those in the developed world during 2009.he year.
Latin American equities – thanks to the strength of Brazil’s market – achieved a 104% return during the
year. Emerging markets in Asia and the Europe, Middle East, and Africa (EMEA) regions also posted
outstanding gains for the year. Within the emerging markets universe, every sector posted positive
returns. Even the worst-performing sector, telecommunication services, advanced 27%.
Trust Funds Report 2009 9
Trust Funds Report 2009