Chapin Hill Advisors, Inc. Market Comment June 30, 2006 Fed raises, market rallies ….what’s next? As expected the Fed raised overnight rates by 25 basis points or one quarter of a percent. This thwas the 17 time rates were raised since June 2004. The post-meeting communiqué removed the word “vigilance” which was interpreted as dovish rather than hawkish. The Fed indicated that while inflation was a concern, growth in the economy was moderating and housing was slowing therefore rates only needed to be raised by 25 basis points. This immediately brought speculation that the Fed was “done”. Wall Street jumped for joy and rapidly ran the markets up with heavy volume. The markets had their biggest one day rally in three years. Volume was strong and indices were up anywhere from 2% on the S&P to almost 4% on the Russell 2000. However, even with the rally, most indices are thdown for the quarter. As of the close on June 29 , Nasdaq leads with a (7)%, Russell 2000 with a (6.4)% and S&P (1.7)% decline. The dollar fell and international markets were up even more than the US indices. EEM is an exchange traded fund which we use to track the emerging markets. This rallied 7%. Investors have poured money into international markets and especially emerging markets earlier in the year. But as markets tumbled over the last 6 weeks, they exited and the emerging markets fell – most down double digits. Saudi Arabia’s market was one of the hardest hit and dropped ...