2004 is off to a good start! The market declined in the first quarter in each of the past three years, by a significant amount. The market had a correction in the first two weeks of March, which was needed and a 5% correction was anticipated. Company earnings are clearly improving. I anticipate 2004 to be a positive year for the indexes and our portfolios, barring more terrorist activity or other unanticipated activities. The presidential election is another factor to consider.

Changes to the Dow

Three stocks are being replaced in the Dow 30: AT&T, Eastman Kodak and International Paper. The three are slated to be replaced by telecom leader Verizon, insurance giant American International Group and drug company Pfizer.

The stocks being deleted had a combined Dow tenure of over 200 years. Eastman Kodak and AT&T have been members since the 1930s. The changes in the Dow reflect the trends within the U.S. stock market, including the continued growth of the financial and health-care sectors and the diminishing relative weight of basic-materials stocks.

It is the market capitalization of the companies that is most interesting to me. AT&T has a market cap of $15.3 billions and its spin-off, Verizon, has a market cap of $104.2 billion. Pfizer is the most highly valued of the companies being added to the Dow, with a market cap of $271.3 billion and AIG with a value of $191.9 billion.

The Dow will now have four major financial components, as AIG joins J.P. Morgan, American Express and Citigroup. Joining Merck and Johnson & Johnson, Pfizer's addition brings the number of drug stocks to three. Verizon will join SBC Communications as the index's makeup grows to two telecommunications stocks.

There is tremendous happiness in making others happy, despite our own situations. Shared grief is half the sorrow, but happiness when shared, is doubled. If you want to feel rich, just count all the things you have that money can�t buy. Today is a gift, that is why it is called the present. ~~ Unknown author

Jobs and Unemployment

Jobs were created in February and March as the unemployment figures fell. The outsourcing of employees continues to grow within large US corporations as many jobs are being outsourced to India and China. California lost 261,000 manufacturing jobs in three years, most likely due to our awful worker�s compensation insurance rates. Is this an area of concern for our political arena? In the last recession in the early l990�s, about 1.3 million jobs were lost due to technology and business restructuring, many in the manufacturing area. More than one million jobs went to China and Mexico. However, the U.S. Economy created more than 2.2 million jobs in the service sectors like health care, business, education, entertainment and computer services. Globalization benefits American companies, consumers, workers and shareholders. U.S. companies save 50 to 70% through lower costs. Every job outsourced should generate savings that are reinvested for creating new industries and technology.

Business spending on capital equipment appears to have increased at a very good rate so far this year. As capital equipment spending continues, companies will begin to hire soon, as strong demand continues. Kiplinger California Letter reports 32% of companies have planned hiring increases. This is very positive in light of our worker�s compensation problems, state budget trouble, a record debt offering coming out next month and high taxes. Being a native Californian, I can overlook all those problems to continue to live in this beautiful area and climate as my relatives shovel snow in Minnesota.

Office rents will start rising again, but the increases should be modest. Warehouse and factory space is going to cost more this year and shopping centers can�t go up fast enough in LA, Orange County and San Diego.

Federal Reserve officials have stressed that slow job creation -- combined with what have been modest levels of inflation -- allow policy-makers to keep interest rates in place that are at their lowest in four decades. I believe they will stay low as the Presidential election takes place in November. Baring any �hanging chads�, we will have stability in the markets and hopefully in the White House. Since I never disclose my political bias toward one party over the other, you still can�t read anything into that last sentence!

In politics, if you want anything said, ask a man- if you want anything done, as a woman. ~~ Margaret Thatcher

Sandra C. Field, CSA, MBA, CFP