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MERIDEN RETIREMENT BOARD
TUESDAY – JUNE 9, 2009
Overview
Much has been written about a new normal for investment markets, but little has been said about the second wave of challenge that investors will soon face. The new normal attracting attention so far involves the explosion of new government debt, represented last fall as the only choice for the US economy to preserve its banking and automobile industries.~ Another new reality for investors, already priced into the markets, involves the expectation of broader government regulation, considered a defense against future disasters.~ Although layoffs have slowed, unemployment has now reached generational highs, retail spending has stalled, and real estate foreclosure rates keep rising.~ Many investors have already considered the implications of annual trillion dollar federal deficits, a
reduction in retail spending, a delayed recovery in housing, and new taxes on the wealthy.
But there are substantial, additional changes to the investment landscape just down the road, and the impact cannot yet be quantified.~ These unknowns may undermine the market’s recent recovery.~ The top priorities for Washington this summer are overhauling health care and energy reform.~ President Obama is proposing a down payment of $630 billion on the cost of universal healthcare over the next decade, with Congressional estimates reaching more than $1.5 trillion.~ The President’s proposal for a clean energy economy carries even less certain near-term costs, but it appears that higher taxes on carbon-based fuels will be a primary incentive to move US industry toward alternative, cleaner energy sources.~~~~~~ ~~
Meriden Retirement Funds
The Meriden pension funds experienced outstanding investment performance during the past month, closing May with a composite gain of more than 9.2%, and raising calendar year 2009 performance above 10.2%.~ The fiscal year remains down 17.9%.~ The Meriden composite topped $200 million for the first time since the dramatic market decline of last October.~ Strong domestic and international stock performance, coupled with Meriden’s reallocation of funds over the past several months (from Treasuries to externally managed portfolios) resulted in raising the overall equity exposure to 59% by the end of May.
Gold and international growth equities have fueled the performance with 2009 YTD gains of greater than 30%.~ Mid-cap growth has gained more than 18.6% this calendar year.~ And bullish commodity trends powered the AIS Managed Futures fund to a 39.6% monthly gain. The City Employees fund closed the month with $113.5 million and the Police/Fire investment funds totaled $89.2 million.~
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