Investment Strategist from MFS

U.S. economic news

U.S. economic data point to recovery
Retail sales rose in January for the third month out of four, a sign that consumer spending is continuing into 2010. Sales increased 0.5%, which was more than forecast and followed a 0.1% drop in December.


Home prices rose in more than one-third of U.S. metropolitan areas in the fourth quarter, according to the National Association of Realtors.


Fewer Americans than expected filed claims for unemployment insurance in the week ended February 6. Initial jobless applications fell by 43,000, to 440,000 for the week, the lowest level in five weeks.


U.S. and global corporate news


Profits surprise on upside As of Friday more than 350 companies in the Standard & Poor's 500 Stock Index had reported fourth-quarter earnings, with about 76% beating analysts' estimates, according to data compiled by Bloomberg.


Rolls-Royce Group, which is the second-largest maker of commercial and military jet engines, returned to profit in 2009, thanks to strong demand for transport and infrastructure. Net profit for the year was £2.22 billion, compared with a net loss of £1.34 billion a year earlier.


Rio Tinto Group, the world's third-largest mining company, also returned to profit in its second half as prices increased because of the global recovery.


PepsiCo's fourth-quarter earnings nearly doubled as food sales grew in the Americas. The company said that its North American beverage business, which had been a weak performer, was starting to show improvement as brands such as SoBe Lifewater and Gatorade gained market share.

Global economic news

EU vows to maintain stability in eurozone; growth falters European Union countries pledged Thursday to support Greece through its debt crisis but did not offer details on what kind of support might be provided. Leaders of the 27-nation bloc promised "determined and coordinated action if needed to safeguard the financial stability" of the eurozone. The show of support comes as fears spread over a possible sovereign default and the implications such a default could have for the 16-nation eurozone.


The eurozone recovery nearly stalled in the fourth quarter as gross domestic product grew only 0.1%. The slow growth was attributed in part to the worsening recession in Greece, where GDP fell 0.8%. Eurozone growth declined a seasonally adjusted 2.1% in the fourth quarter from a year earlier.


China orders banks to hold more deposits For the second time in a month, China ordered banks to set aside more deposits in an effort to cool the fastest-growing economy after loan growth accelerated and property prices surged. In January property prices in 70 cities climbed at the fastest pace in 21 months, and lending rose to $203 billion, topping the previous three months combined. The reserve requirement will increase by 50 basis points. In Europe, stocks reversed gains on the news amid concern that the tighter lending in China will damp the global recovery.


Mexico's industrial production recovers Mexico's industrial production rose in December for the first time since 2008 as a recovery in U.S. manufacturing boosted demand for exports.


Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.


The views expressed here are those of MFS^®and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any MFS investment product. Individual securities mentioned are for illustrative purposes only and may not be relied upon as investment advice or as an indication of trading intent on behalf of any MFS product.


Securities discussed may or may not be holdings in any of the MFS funds or any of Schnack Financial Group's (SFG) portfolios. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. For a complete list of holdings for any SFG portfolios, please contact us at info@SchnackFinancial.com.


Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; boston.com.


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Investment Strategist from MFS

Deriving perspective from panic

Two events of late have added further uncertainty to financial markets and have for some cast doubt on the trajectory of economic recovery.

After looking closely at the Greek debt situation and the January labor numbers, we believe there is some cause for concern but that the likely path ahead is for continued healing of the global economy and financial markets.

While Greece is in a very difficult position, we do not believe the eurozone will let it fail. And the labor market, while a laggard in this recovery, is showing signs of improvement.

At MFS, we encourage investors to look behind the headlines in an effort to derive perspective from panic. It is my hope that the following discussion, by shedding light on these events, will enable investors to make rational, not fear-based, decisions.

Sovereign risk crisis: Greece up first

• Greece is a very small part of the eurozone (2%). However, in light of the deleterious effects of the credit crisis, Greece's problems (large and persistent fiscal and trade deficits on top of high public indebtedness and poor international competitiveness) underscore similar troubles facing other developed countries, both inside and outside the eurozone.
• In the aftermath of the collapse of Lehman Brothers Holdings, it is very difficult to imagine that Greece will be allowed to fail (default on its debt). Not only are current concerns over Greece's failure increasingly putting serious pressure on Portuguese and Spanish financial assets, but French, Swiss, and German banks also find themselves significantly exposed to Greek banks.
• Unfortunately, it is not clear who or how Greece would be bailed out. Unlike the United States, the eurozone does not have a lender of last resort, nor does it have a common fiscal policy that might funnel aid or loans to Greece.
• Nonetheless, to ensure the cohesion of almost all western European economic and political institutions and to safeguard against a much more serious economic decline, it certainly behooves European policymakers to become more proactive, and we believe they will.

U.S. labor markets: Not signaling a double-dip trajectory

• The labor market data continue to show improvement, though at a painfully slow pace. However, the more forward-looking elements within the data point to relatively better times ahead.
• These forward-looking indicators include 1) continued increases in the number of temporary workers, 2) the first rise in manufacturing payrolls in three years, 3) improvements in the diffusion index, which measures the proportion of companies hiring and firing, 4) a longer work week, 5) rising aggregate hours worked, 6) better employment conditions from the ISM surveys, and 7) broadly declining initial jobless claims.
• Even with these encouraging signs, the path ahead for labor is likely to remain frustratingly sluggish, as corporate America looks for confirmation of an improved and sustainable rise in demand before hiring again.
• The first step for the labor market is to consistently produce positive jobs growth. This development would stop the bleeding of household incomes and improve the prospects for the consumer.
• The next step is for the labor market to produce enough jobs to stop the unemployment rate from rising. Depending upon how many discouraged unemployed workers re-enter the labor market, this would require a net increase of at least 100,000 jobs per month.
• The final step for the labor market is to produce jobs at a fast enough rate to measurably bring the unemployment rate down. Here, we likely would need to see job creation in excess of 200,000 per month.
• While this final step appears quite daunting, especially given that during the last labor market expansion the U.S. economy produced only about 150,000 jobs per month, let's take one step at a time.
• We believe that we are in the process of taking the first step and will see modest positive jobs growth within the next few months. Then we can focus our attention on the future.

You can visit www.mfs.com to view market commentary, including Chief Investment Strategist Corner. You can also go to Week in Review, which is published every Friday afternoon. Global Perspective provides monthly insightful commentary and analysis on markets around the globe. These features, plus complete product and performance information, can be found on mfs.com. These resources should be reviewed in conjunction with your personal investment strategy in addition to working with you individual financial advisor.

Source: MFS Research

The views expressed are those of Erik Weisman and are current through February 10, 2010. They do not necessarily reflect the views of individual MFS portfolio managers or other persons in the MFS organization. These views are subject to change at any time based on market and other conditions, and MFS disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any MFS fund.

The investments you choose should correspond to your financial needs, goals, and risk tolerance. For assistance in determining your financial situation, please consult a financial advisor.

Past performance is no guarantee of future results.

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February 2010 Schnack Financial Newsletter

	How to Double the Power of Your Tax Refund Filing your taxes may be a dreaded chore, but receiving your refund is a wonderful reward. What you do with a refund is up to you, but here are some ideas that may make your tax refund twice as valuable.
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	College Debt: How Much Is Too Much? According to a recent survey, the confidence of parents in their ability to save for college dropped significantly over the past year. That's not entirely surprising, considering the economic climate. The trend of not saving enough makes families heavily dependent on borrowing to fund college.
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	Special Needs Trusts A special needs trust (SNT), sometimes referred to as a supplemental needs trust, is a trust that is established to benefit a disabled person, or a person who has special needs, while still allowing such persons to qualify for and receive governmental health-care benefits.
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	Ask the Experts: What's an exchange-traded fund? Like a mutual fund, an exchange-traded fund (ETF) pools money from investors to buy a group of securities.
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	Ask the Experts: How can I use exchange-traded funds? There are many ways an exchange-traded fund (ETF) can be used to help round out or supplement an existing investment portfolio.
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Market Week: February 8, 2010

The Markets


After an encouraging start, domestic equities resumed their recent losing ways. Small caps and international stocks led the indexes downward--the Dow dropped 268 points on Thursday alone--as domestic equities edged closer to the 10% decline from recent levels that is typically considered the hallmark of a correction. The Russell 2000 is now down about 8.6% from its January 19 high; the Nasdaq has fallen about 7.7% in the same time.

Market/Index	2009 Close	Prior Week	As of 2/5	Week Change	YTD Change
DJIA	10428.05	10067.33	10012.23	-.55%	-3.99%
NASDAQ	2269.15	2147.35	2141.12	-.29%	-5.64%
S&P 500	1115.10	1073.87	1066.19	-.72%	-4.39%
Russell 2000	625.39	602.04	592.98	-1.50%	-5.18%
Global Dow	1984.48	1882.49	1835.66	-2.49%	-7.50%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	3.63%	3.59%	-4 bps	-26 bps

Last Week's Headlines

• Mixed messages: The unemployment rate actually fell--that's right, FELL--in January to 9.7%. That's the lowest rate since August, and the biggest single-month drop in more than a decade. Even including people who are underemployed or who have given up looking for a job, the total unemployment percentage dropped to 16.5% from 17.3%. However, a separate survey found that a loss of 20,000 jobs left business payrolls essentially flat. Also, the rolling four-week average of initial unemployment claims continued to rise, though the number was roughly 19% lower than at this time last year.
• December construction declined 1.2% from the previous month. That's 9.9% below last December, and is a bit better than the 12.4% decline for all of 2009.
• Manufacturing improved in January for the sixth month in a row. The Institute for Supply Management's index rose to 58.4%, the highest number since August 2004 (any number over 50 indicates manufacturing growth).
• Despite a sharp drop in Toyota sales (no surprise there), January auto sales were up 6.3% from December, marking the third consecutive increase over the previous year's monthly figure. Both Ford and GM reported increased sales. Much of the buying was done by business fleets rather than individual consumers.
• Business productivity began to slow in the fourth quarter of last year, though it was up 2.9% for all of 2009. The output of goods produced in Q4 rose 7.2%, while the number of total hours worked by the labor force was up 1%--the first increase since Q2 2007. (However, the total hours worked for all of 2009 was down 6.4%, a record decline.)
• Incomes rose 0.4% in December, though wages and salaries were up by only 0.1%. Consumer spending also increased by 0.2%, and the personal savings rate rose to 4.8% from 4.5% in November.
• A weak auction of Portuguese sovereign debt and Spain's forecast of higher budget deficits for the next three years fanned investor concern that Greece's economic troubles might be only a hint of what's to come for the European Union. As a result, the euro hit an eight-month low (just under $1.37) against the dollar.
• President Obama proposed a $3.8 trillion budget for the fiscal year that begins in September. It forecasts a $1.56 trillion budget deficit for next year, compared to the $1.2 trillion deficit when Obama took office and the estimated $1.3 trillion deficit this year.

Eye on the Week Ahead

A light week for economic data gives investors little to focus on other than retail sales, additional earnings reports, and the potential fallout from credit woes in several European countries.


Key data releases: International trade, Treasury budget (2/10); retail sales (2/11).


Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.


The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.


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