Introduction
Hi, I'm Dan Peirce from the Global Asset Allocation team here at SSgA, and with me today is Senior Economist Geoff Somes. Geoff, the 2008 markets remain extremely difficult as beleaguered financial institutions seek to rein in their balance sheets and credit spreads on even high-quality assets have widened dramatically. To add insult to injury, it now seems that a US recession is taking shape. Do the data continue to suggest a pessimistic outcome?

Data Supports Recession

• Data validates pessimistic view that US is in recession
• Signs include:
• Labor market contracting
• Consumer confidence breached

Fed Actions
So it would seem that you continue to believe that the Fed will continue to cut rates?

• Market pricing in strong likelihood of a 75 basis point cut at next meeting
• Sub-2% scenario: funds could go below 2%

Term Auction Facility
Fed announced it would be increasing the amount in TAF funding. What is this all about?

• Used to address liquidity concerns
• Put $40 million out to banks, increasing to $100 million
• Has been fairly successful

European Monetary Policy
European economies are losing momentum, but central banks are being cautious about rate cuts.

• Theme is lost momentum
• UK:
• BOE cutting very gradually
• Inflation concerns
• Down to 4 ½% by year-end
• Europe:
• ECB not cutting
• Rhetoric becoming more hawkish
• Some inflation concerns
• Eventually will ease

Australia

• Still tightening, raises rates to restrictive 7.25%
• May now be in “pause and assess” mode
• More closely linked to booming Chinese economy than US
• Inflation concerns, looking to slow demand and ease inflation

Canada

• Exposed to slowing US economy
• Twin-speed economy:
• Trade and manufacturing sectors slowing
• Consumer and home building doing fine
• Bank of Canada has cut three times
• Will eventually slow as leakage from trade and manufacturing spread to consumer sectors

Conclusion
From an investing viewpoint, Canada's resource exposure has helped it become a relatively strong performer among the developed equity markets. Even though commodity prices may well be due for some consolidation, we like Canadian equities for their exposure to the commodity theme, and the recent rate cuts may further support local markets. Thank you, Geoff, for your updated perspective on the economic outlook and policy challenges across the developed markets.

This material is for your private information.

The views expressed are the views of Geoff Somes and Dan Peirce only through the period ended March 10, 2008 and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. We encourage you to consult your tax or financial advisor. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information. Past performance is no guarantee of future results.

Posted On: March 13, 2008