October Newsletter

Medicare Annual Enrollment Season Is Here The annual enrollment period for Medicare runs from November 15 through December 31. During this period, you can make changes to your Medicare coverage that will be effective on January 1, 2011. Even if you like the Medicare coverage you already have, it's a good time to explore your options, especially if your health or financial circumstances have changed. More Details

They're Baaack: RMDs for 2010 In response to deteriorating economic conditions in 2008, Congress waived required minimum distributions (RMDs) from IRAs and defined contribution employer plans for the 2009 calendar year. This allowed individuals to avoid having to deplete retirement plan assets while the value of those assets was suddenly depressed. But RMDs are back for 2010. Here's how the rules apply. More Details

Year-End Investment Planning Is More Challenging in 2010 Significant changes in the tax code scheduled to go into effect in 2011 could substantially alter the taxation of your portfolio. That could in turn affect whether your current investments will still be appropriate in the future. More Details

What does a stronger dollar mean for my portfolio? A stronger dollar can have a profound impact on the value of your portfolio, even if you don't think you own any international investments. More Details Why should I care about Europe's debt problems? How is it possible for the debt of such a relatively small country as Greece to have such a profound impact on investments in a 401(k) plan a continent away? More Details --see disclaimer below--

Week in Review: U.S. stocks rise on positive economic news

U.S. economic news

Home sales, home starts rise
A couple of positive reports on the U.S. housing market were released this week. The U.S. Department of Commerce reported that U.S. housing starts rose 10.5% in August to a seasonally adjusted 598,000 annual rate. This unexpectedly positive news was followed by a report from the National Association of Realtors that August home sales rose 7.6% from the previous month to 4.13 million on a seasonally adjusted annual basis. However, the price of U.S. homes fell 0.5%, according to the Federal Housing Finance Agency.

Fed says it could take future action
Although the Federal Reserve made no changes to its key short-term interest rate and took no other immediate steps, it said in a statement that it “is prepared to provide additional accommodation if needed to support the economic recovery,” and it expressed concern about inflation being too low.

Consumer Price Index flat
The U.S. core Consumer Price Index, excluding energy and food, was flat from July to August, according to the U.S. Department of Labor. The overall CPI rose 0.3%. Year over year, the CPI rose 1.1%, with the core CPI up 0.9% in August from a year earlier. Because sluggish domestic demand is likely to keep inflation tame, many analysts expect the Fed to make large-scale asset purchases in the coming months.

Weekly jobless number rises
Initial unemployment claims rose by 12,000 to 465,000 in the week ended September 18, the U.S. Department of Labor said, but the four-week moving average fell by 3,250 to 463,250, reinforcing a longer-term positive trend.

Economic indicators lead upwards
The Conference Board’s index of leading economic indicators rose slightly, but more than expected in August. This suggests a continued weak economic recovery, but eases immediate concerns of a double-dip recession.

Corporate debt defaults down
The default rate for U.S. corporate debt is expected to drop below 3% by the end of 2010, according to Moody’s Investors Service. This is a sharp drop from a peak of 14.6% in November 2009 and below the default rate of 3.1% from August 2008, a month before the financial crisis began.

Demand for capital goods rises
Although durable goods orders declined overall by 1.3% in August, orders for non-defense capital goods, excluding aircraft – a gauge of capital spending by businesses – increased by 4.1%. A sharp drop in demand for airplanes and cars was balanced by rising demand for machinery, computers, and fabricated metal products.

U.S. and global corporate news

Brazil’s Petrobras offers record share sale
Petroleo Brasileiro (Petrobras), Brazil’s federal oil company, introduced a share offer of $70 billion, which was snapped up, with the Brazilian government buying $43 billion and the market purchasing the remaining shares. Strong demand allowed Petrobras to sell the shares almost at par with Thursday’s closing price. The proceeds will go to develop recently discovered large offshore oil fields. Petrobras expects to double its oil output by 2014, making Brazil the world’s fifth-largest oil producer, according to The Wall Street Journal.

Nike’s profit rises 9%
Shoe and athletic apparel manufacturer Nike announced a 9% growth in its quarterly profit on higher demand for its athletic apparel and less costly discounting. The company says its revenue has rebounded in the last three quarters, following lagging demand during the recession.

Darden announces higher sales
Darden Restaurants, the casual-dining giant that owns Olive Garden, LongHorn Steakhouse, and Red Lobster, posted a 20% rise in first-quarter earnings. Although same-store sales fell 1.7% at Red Lobster, they rose more than 2% at Olive Garden and LongHorn in a positive sign for the casual-dining industry.

General Mills has healthy earnings
General Mills’ earnings rose 12% on higher sales of certain cereal brands and changes in the value of some commodity hedges. Profit was somewhat diminished by higher raw-material costs.

Global economic news

Eurozone growth slows
Private sector output growth in the eurozone slumped to a seven-month low in September and is expected to slow more in the fourth quarter, according to a survey by financial-information company Markit. The firm's monthly measure of private-sector activity fell to 53.8 in September from 56.2 in August. However, any number above 50 indicates growth. Meanwhile, new industrial orders in the eurozone posted their sharpest monthly drop in a year and a half in July. Factory orders fell 2.4% from June but rose 11.2% above year-earlier numbers.

German business confidence rises
German business confidence rose surprisingly in September, according to the German research institute Ifo. Its closely watched German business sentiment index rose to 106.8 in September from 106.7 in August, beating expectations of a slight drop.

Irish GDP stumbles
Just after Ireland recovered from its recession in the first quarter of 2010, its Central Statistics Office announced this week that its second-quarter gross domestic product unexpectedly fell 1.2%. Ireland was the first country in the eurozone to slide into recession and was one of the most troubled economies in the area last year.

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 information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, 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. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on mfs.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.

--see disclaimer below--