Are We Out of the Woods Yet

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Are We Out of the Woods Yet? US Stock Market Out
look

Katherine M. Gehl Vice President
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An Epic Reversal
20001Q 20024Q Nasdaq Index 5,100 1,400
Margin Debt 280 Bil. 130 Bil. CNBC Viewers
/Day 418,000 232,000 Thrift Savings Accounts 4
51 Bil 703 Bil. Headlines Stopping Nasdaqs
Armor Plate Train Wont Be Easy Your Po
rtfolio Prosperity Is Lock in a Steady
7 Reshaping the American Economy

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The Headlines
U.S. Economy Struggles to Rebound
Bush Strikes Against Iraq United Airlines Plan
s Layoffs to Trim Costs Smaller Pay Raises Expe
cted as Economic Slump Exists
Recession Continues to Ravage State Budgets
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The Headlines

• U.S. Economy Struggles to Rebound
• Bush Moving Toward Strike Against Iraq
• United Airlines Plans Layoffs to Trim Costs
• Smaller Pay Raises Expected as EconomicSlump
  Exists
  
• Recession Continues to Ravage State Budgets

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The Headlines

• U.S. Economy Struggles to Rebound
• Bush Moving Toward Strike Against Iraq
• United Airlines Plans Layoffs to Trim Costs
• Smaller Pay Raises Expected as EconomicSlump
  Exists
  
• Recession Continues to Ravage State Budgets

1993
6
Treasury Bill Yields
()
7
Flight to Safest Assets
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Historical Stock-Market Returns 19332002
1993 1988 1999 1997 1986 1998 1995
1994 1979 1996 1991 1992 1972 1983 1989
1987 1971 1982 1985 1984 1968 1976 1980
1978 1965 1967 1975 1970 1964 1963 1955 1
960 1959 1961 1950 1956 1952 1951 1945 1
948 1949 1943 1938 1958 1954
1947 1944 1942 1936 1935 1933
010 1020 2030 3040 4050 5060
Annual Return
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Historical Stock-Market Returns 19332002
Annual Return
0(10) 1934 1939 1940 1946 19
53 1962 1969 1977 1981 19
90
2000
(10)(20) 1941 1957 1966 1973 2001
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Historical Stock-Market Returns 19332002
Annual Return
0(10) 1934 1939 1940 1946 19
53 1962 1969 1977 1981 19
90
2000
(10)(20) 1941 1957 1966 1973 2001
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The Equity Risk Premium Is High
Expected Return from Stocks vs. Bonds
()
Stocks Very Attractive
Average
Bonds Very Attractive
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Stock-Market Returns
SP 50019801999
Forecast
T
otal Return 17.6 9.1
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Stock-Market Returns
SP 50019801999
Forecast
Earnings Growth 6.4 6.0 Dividend Yield 3.6 3.1

10.0 9.1
17.6 9.1
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Stock-Market Returns
SP 50019801999
Forecast
Earnings Growth 6.4 6.0 Dividend Yield 3.6 3.1

10.0 9.1
P/E Expansion 7.6 0.0 17.6 9.1
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Stock-Market Returns
SP 50019801999
Forecast
Earnings Growth 6.4 6.0 Dividend Yield 3.6 P
/E Expansion 7.6
Total Return 17.6
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Stock-Market Returns
SP 50019801999
Forecast
Earnings Growth 6.4 6.0 Dividend Yield 3.6 3.1
P/E Expansion 7.6 Total Return 17.6
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Stock-Market Returns
SP 50019801999
Forecast
Earnings Growth 6.4 6.0 Dividend Yield 3.6 3.1
P/E Expansion 7.6 0.0 Total Return 17.6
9.1
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Corporations More Efficient
U.S. Manufacturing Productivity
197579
198589
199599
2002
19
Consumer Purchasing Power Way Up
Wage Growth in Excess ofPrice Increases for
Consumer Goods
()
Average
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Consumer Debt Burden Down
Debt Service as of Disposable Personal Income
()
21
Business Spending Depressed
Business Investment Spending
( Bil.)
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Recovering Earnings
SP 500 Quarterly vs. Prior Year
()
2001
2000
2002
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The Cost of Moving Money
Annualized Returns 19842001
AverageU.S. Stock Fund
Average U.S. Stock-Fund Investor
SP 500
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Summary
History provides valuable perspective
Economic picture is brightening Turbulent st
ock market creates new opportunities

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