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Meriden Retirement Board
Tuesday – August 8, 2006
Overview
The Federal Reserve today agreed to ease off the economic brakes, ending more than two years of persistent quarter-point interest rate increases designed to slow inflation. Is it a pause or the end of a cycle? The Fed acknowledges that the impact of seventeen consecutive hikes has yet to be fully digested by the US economy, clearly hoping for a soft landing. With reports suggest rising unemployment and a slowing economy, some fear the Fed’s anti-inflation campaign went too far and will trigger recession, rather than the desired slowdown.
Investment markets look forward, not back. After analyzing this Fed policy move, investors will try to answer the question: what comes next? Despite the Fed warnings of possible further hikes down the line, US Treasuries have already rallied for six weeks, anticipating a slow economy and lower rates. If the core inflation data cool, US equities could advance smartly this fall amidst slowing-but-growing corporate profits; but if energy and labor costs rise further, we can brace for another rocky October.
Meriden Retirement Funds
Avoiding the market downdraft of the final quarter, the Meriden Police/Fire investment accounts closed the fiscal year with a 14.9% gain; the City Employees Retirement fund advanced 15.8%.
The City Employees fund ended the year with $125.3 million. The asset allocation in that plan reflects 66% in stocks, 20% in fixed income, and 14% in REIT partnerships and managed futures. Much of the fixed income was held in short-term cash alternatives. The combined Police & Fire funds also carried a significant money market allocation, as the gold portfolio retained capital gains from May, assessing reentry points in selected equities. Overall the Police/Fire funds show a 61% equity position, 21% fixed income, with the remainder in REITS and managed futures.
Investment Updates
Summary reports of the activities of the fiscal year have been submitted separately, as required by your auditors form Levitsky & Berney.
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