Long Term Perspective

The Wilshire 5000 is the most comprehensive of market indicators. It includes all publicly traded U.S.-based companies - now more than 7000. The Wilshire 5000 rose 4.6 percent in 2005; this has pushed down the 10-year average to 9.1 percent. Oddly enough, this comprehensive market measure outperformed several key indexes such as the Nasdaq composite, the DJIA and the S&P 500 in 2005.

Short Term Perspective

The Wilshire 5000 is widely monitored by Fed officials because this index indicates the pattern of consumer wealth. "The wealth effect" is the concept that consumers are more likely to spend more money on goods and services when the stock market is appreciating. Conversely, consumers could curtail spending when the stock market is declining.

Over the past three years, the Wilshire 5000 has posted steady year-over-year gains, although gains were generally slower in 2005 than in 2004. In November 2006, the index was up 12.8 percent from a year earlier. At the end of November, the Wilshire stood 12.8 percent higher than year-end 2005 levels.

The Wilshire 5000 increased 2.1 percent in November, after gaining 4.8 percent in the previous month. On the whole, investors toe the thin line between loving a strong economic environment, which is more likely to generate profits, and fearing inflationary pressures coupled with Fed firming. Investors were generally relieved that the Federal Reserve has been on hold. Moreover, economic indicators are showing moderation and the most recent inflation data were benign.