Fourth Quarter 2009 through 2010 will be Challenging to Bleak, Says D.C. Investment Veteran

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Barry Cliff, president of AFC Asset Management Services, Inc., provides his prediction on the market for fourth quarter 2009 through 2010.

I estimate a market decline of at least 10 percent, and probably much more

While many financial experts are predicting the end of the recession, Barry Cliff, a well-respected veteran of the Washington D.C. investment management community, is predicting another significant drop in the market by the end of the first quarter of 2010. Cliff, the President & founder of AFC Asset Management Services, Inc. (AFC), wrote, "I estimate a market decline of at least 10 percent, and probably much more," in his September 29, 2009 letter to investors.

Citing historical lessons, Cliff noted that the October 2007 to March 2009 market decline of 56 percent was the worst for the major indices since 1929-1932. Within the catastrophic market decline of 1929-1932, there were five bear market rallies of more than 20 percent, all of which were followed by a severe decline, eventually leading to a new market low in 1932.

"The recent bear market drop was followed by a rally of more than 58 percent from March 9, 2009 through September 22, 2009, but keep in mind that investors still need to make another 46 percent to get back to the 2007 peak. We have not resolved the issues that precipitated the recent decline and the worst may be yet to come," noted Cliff.

Reasons for a Negative Outlook
Additionally, Cliff cited these factors as contributing to AFC's negative outlook:

  •      Consumers, which account for about 70% of our nations GDP, have far less to spend; household net worth is down more than $7 trillion from June 2008 to June 2009. That is a loss of more than nine percent due to declines in financial assets and real estate values.
  •     Credit card companies are lowering limits and canceling lines of credit;
  •     Almost 100 banks were taken over by the FDIC so far this year, with more than 400 banks on the FDIC's list of troubled banks;
  •     There are about 18,000 home foreclosures each day;
  •     Politicians are trying to resolve a debt-induced crisis and over-leverage with additional debt; and
  •     More nasty news is looming in commercial real estate, as failed commercial real estate projects have tripled the previous record high for losses set in 2002. This is just the tip of the iceberg.

Cliff noted that in mid-to-late 2007, most investors and government leaders were complacent when stock market indices reached (almost) all-time highs. "Very few were concerned about inflated home prices and over-extended consumer debt, but we were part of the few who were concerned. We are concerned now as well," he added.

Preserve Wealth Rather Than Chase Growth
"We feel that in times of increased risk it is better to take the risk of lost opportunity rather than the risk of lost capital," said Cliff.

In 1985, AFC developed an investment methodology predicated on the simple philosophy, "be in the market when it is going up and out of the market when it is going down". The challenge was defining "up" and "down." After years of research and development, AFC launched its Dynamic Asset Allocation program in 1997.

AFC's Dynamic Asset Allocation program has significantly outperformed the S&P 500, Dow Jones and NASDAQ stock market indices over the most recent 10-year period, with standout performance through the two recent severe bear markets. For more information on AFC Asset Management, contact Jim Young at 301-588-5000, afcassetmanagement.com.

Past performance is not necessarily indicative of future results. As with any investment, risk is involved and investors can potentially lose money.

About Cliff and AFC: AFC Asset Management Services, Inc. (AFC) is a Registered Investment Advisor established in 1985. AFC provides professional money management services and investment advice to individual investors and retirement plan sponsors.

Cliff is an investment management entrepreneur, and is the President and founder of AFC Asset Management Services, Inc. (AFC).

Since starting his career in 1968, Cliff has served the financial needs of more than 1,500 individual and corporate clients. In 1977, he was one of the earliest financial planning professionals to earn the CFP® (Certified Financial Planner) designation. Since that time, he has served as the Chairman of the Financial Products Standards Board; was an adjunct faculty member of the College for Financial Planning; was the first inductee into the College for Financial Planning Alumni Hall of Fame; and served as a member of the Ethics Committee of the Institute of Certified Financial Planners.

In addition, Cliff has had articles published in a number of professional journals, including The Practical Accountant and CFP Today, and has appeared on CNN's "Moneyline."

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