The market continued to improve on a relative basis over the past week by 1.0 percentage points coming closer to fair value at 90.2%FV. This places the market back within 10 percentage points of fair value. The market is in a much improved position from several weeks ago when we were looking at 85.9%FV. It may not feel like it is improving gauging from negative news tilts in the media.

All but three sectors showed improvement with Consumer Discretionary taking the lead ad- vancing a whopping 3.0 percentage points to 84.0%FV. This is a tremendous improvement from just a few weeks ago when the entire sector was under pressure. Materials also posted a sizable increase with a gain of 1.7 percentage points to 91.9%FV. Usually an increase to this level for Materials is a support for long term increases in economic conditions. A longer term improvement was also supported by an increase in Industrials of 0.8 percentage points to 95.2%FV. Both of these sectors seen to be expecting improvements in economic expansion not just in the U.S., but globally.


Of the sectors that posted a gain this week Consumer Staples is the closest to fair value at 99.8%FV. Health Care also posted a nice gain of 1.1 percentage points to 85.1%FV.

On the down side there was a familiar name, Energy at 82.7%FV. Fortunately, global oil pro- duction is starting to tail off ever so slightly and we will most likely see supplies start to tail off in the next several months as lower production and higher consumption play their role in supply and demand equilibrium.

Utilities lost some ground this week declining 1.0 percentage points to 102.9%FV. It is currently the highest valued sector on a relative basis. As interest rates show stronger signs of increasing the Utilities sector will feel some selling pressure due to money flows out of utilities and into other more traditional debt securities. Utilities has enjoyed support from investors seeking higher yields over the past five years and some of the investors will start to move back into previously favored areas.

Telecommunication Services is the only other sector peeking above fair value at 102.7%FV and it also experienced a decline, but on a smaller scale giving up just 0.4 percentage points. We expect the sector to remain above 100%FV for some time as the industry can continue to significantly contribute to productivity advances globally.