The U.S. Equity Market continued its advance in the fourth quarter after bouncing back in the third quarter. We are closing the year with some solid gains . The year to date returns for the following indices are:

                                                    2006 YTD Market Index Performance
                                                    Dow Jones Industrial Average             16.29%
                                                    S&P 500 Index                                  15.79%
                                                    NASDAQ Composite Index                9.52%
                                                    Lehman Aggregate Bond                      4.94%

Please keep in mind that the above numbers reflect performance since the beginning of the year. Your quarterly reports reflect a later beginning date, typically 2/28, 3/31 or 4/30. For comparison purposes the following are the relevant numbers. Also keep in mind that beyond proper time frame, any meaningful comparisons to indices need to take into consideration the makeup of the portfolio with regard to types of securities (ie: equities, domestic/foreign, and fixed income positions).

                                                                     Since 2/28    Since 3/31   Since 4/30
                         Dow Jones Industrial Average   13.37%        12.19%         9.64%
                         S&P 500 Index                         10.75%          9.53%         8.22%
                         NASDAQ Composite Index       5.87%          3.23%         3.99%
                         Lehman Aggregate Bond             3.79%          4.70%         4.85%

The Federal Reserve took another pause from raising rates, a relief to investors as they were able to focus on equity fundamentals which were very positive. The economy slowing down further alleviated lconcerns about a possible rate hike in early 2007. The slow down in the economy was led by weaknesses in housing, auto and consumer spending.

This fourth quarter will mark the twentieth consecutive double digit growth in earnings for stocks in the S&P 500. Earnings had gotten ahead of stock prices and these past two quarters have reflected stock prices continuing to play catch up. Although earnings will continue to grow into 2007, we expect that the growth will decelerate. This may sound counter-intuitive but a slowdown in earnings growth for stocks is still favorable. The reason is that it reduces the probability that the Feds will increase rates with more signs pointing to an economic slowdown. Interest rates are an even greater concern at this juncture because of fear of a harder landing for the economy, which in turn would increase the probability of a recession. The concern is that another rate hike could overdo it. Nonetheless, inflation concerns will dictate the next move as it relates to interest rate changes and thus far, although seemingly tame, there were still some mixed signals on the inflation front.

As is expected with any run up, market corrections usually lurk around the corner. Possible profit taking after the end of the year for those waiting after the end of the tax year may take place, however we feel positive about the markets for 2007 and would see a market weakness as a buying opportunity. I wrote an article in our latest newsletter about the Dow being in record territory. It contains additional insights about investing and I urge you to read it if you haven't yet. It is posted on our website under the Client Center section.

On behalf of everyone at IFS, I want to take the opportunity to thank you for your trust and confidence and as always we want to remind you how thankful we are for the opportunity to serve you. We wish you a healthy, happy and prosperous New Year.