Legend Advisory Corporation, a registered investment adviser, noted that its artificial intelligence models, similar to its Asset Allocation Neural Network (AANN) model that forecasts the relative strength of global market sectors, has provided data assisting Legend’s Chief Investment Officer, Shashi Mehrotra, in outlining his financial market forecasts for 2008.

Mr. Mehrotra’s 2008 Market predictions:

1. The financial sector should outperform in the second half of 2008.

The sub-prime crisis is currently wreaking havoc on the markets, and many financial services firms are down as much as 40% for the year. While Mr. Mehrotra feels this will likely continue for awhile, he believes that financial firms are savvy enough to realize that it’s better to swallow the frog whole rather than to nibble on it. Therefore, the fourth quarter of 2007 could be a big write-off season, with first quarter earnings taking a big hit. But Mr. Mehrotra predicts that these stocks will be beaten down too far in the beginning of the year, providing an opportunity for potential appreciation in the latter part of 2008.

2. Corporate earnings growth should continue to decline.

2007 marked the sixth year of earning expansion (source: S&P 500 Earnings and Estimate Report by Standard & Poor’s Index Service as of 9/19/2007). The pace of earnings growth has slowed considerably, however, Mr. Mehrotra believes 2008 will see further slowing of growth in corporate earnings.

3. P/E multiple expansion will result from lower interest rates.

Mr. Mehrotra is looking for an increase in P/E ratios for two reasons. The first is that price increases have not kept up with earnings increases. Over the last six years, earnings have grown approximately 160% while the stock markets have grown just about 50%. Mr. Mehrotra believes that the gap between the two should narrow. Secondly, he believes that interest rates should continue to fall which will further facilitate P/E multiple expansions.

4. The US Dollar should continue to weaken throughout the year, but could reverse its course before the end of 2008.

Mr. Mehrotra believes that lower interest rates could also result in further weakening of the US Dollar but, the narrowing trade deficit could lead to a reversal of this trend in the later part of the year.

5. After underperforming the broader markets for almost 6 years, healthcare should surprise investors (positively).

On a total return basis, the S&P has outpaced the healthcare sector by a 3:1 ratio over the past 6 years. Mr. Mehrotra believes healthcare is now poised for growth. Mehrotra states, “I see this as a secular phenomena, its upside coinciding with the graying of America.”

6. The real US economic growth rate (GDP) will decline in 2008, below its historical trend.

Mr. Mehrotra estimates the U.S. economy to grow at an annual rate of approximately 1.5% to 2.0% for 2008.

7. Growth stocks should outperform value stocks in 2008.

Style is a cyclical phenomenon, and since value has been outperforming growth for the past 7 years, Mr. Mehrotra believes we are due for a change in that trend. “We tested our artificial intelligence models six different ways on this theory,” says Mehrotra, “the answer was the same every time – growth for 2008.”

8. The S&P 500 index should reach 1625 by mid year, 2008.

This represents an increase of approximately 15% from the time of this writing (November 26, 2007). After reaching this high, Mr. Mehrotra believes the Index will experience consolidation in the second half of 2008. This prediction calls for a reversal in the trend of 2004 thru 2006, which saw the first six months of the year exhibiting weaker performance than the last six months of those years.

Legend Advisory’s artificial intelligence, such as the models Mr. Mehrotra used in making the above forecasts, are essentially computer models that think and learn much like a human brain but at very fast speed. The artificial intelligence models are known as "neural networks." A neural network is an analogy to human brain cells, called neurons, with connected neurons referred to as a neural network. Neural networks, such as Legend Advisory’s models, sift through data using highly interconnected processes, and like brain cells, can learn the structure of data and detect patterns. The artificial intelligence is able to scan thousands of pieces of data at a time at very fast speeds, examining their interrelationships and making predictions. Legend Advisory Corporation employs certain neural network models to forecast the strength in growth equities versus value equities and the relative strength of asset classes in domestic and international stock and bond markets among other financial market indicators.

Every month, Legend Advisory uses this artificial intelligence to help its Investment Committee determine the optimal global asset classes and styles of investing for which to focus the investment portfolios they manage. After an evaluation of the artificial intelligence output, Legend Advisory’s Investment Committee uses optimization software to create asset class weightings to suit the individual risk tolerances of Legend's model portfolios. Finally, a proprietary mutual fund selector process is used to determine which mutual funds will be employed.

Shashi Mehrotra is a Chartered Financial Analyst and the Chief Investment Officer of Legend Advisory Corporation. The opinions and predictions expressed here are those of Shashi Mehrotra solely and not necessarily the opinion or expectation of Legend Advisory Corporation. Such opinions and predictions are as of November 26, 2007, and are subject to change at any time based on market and other conditions. No predictions or forecasts can be guaranteed. Legend Advisory Corporation does not recommend that any investment decision be made in light of the predictions provided. Individuals should seek the advice of their own investment professional before making any decision to buy or sell securities.

Legend Advisory Corporation, www.legendadvisorycorp.com, is a registered investment adviser headquartered in Palm Beach Gardens, FL. The firm is a subsidiary of Waddell & Reed Financial, Inc. (NYSE:WDR), part of one of the oldest mutual fund complexes in the U.S. with over $50 billion under management (as of June 30, 2007, including all investment managers within the organization). Legend Advisory Corporation has over $1.5 billion in assets under management (as of October 31, 2007) from public and private retirement plans, endowments, foundations, institutions and individuals. Legend Advisory Corporation’s “Investing with Intelligence” is available to clients through its national network of brokers and financial advisors.

The reference to the S&P 500 Index is for illustrative purposes only.Direct investment cannot be made into the index itself. Past performance is no guarantee of future results. Investing involves market risk, including the possible loss of principal. The information contained herein has been obtained from sources believed to be reliable, however the accuracy of the information can not be guaranteed. There is no guarantee that the recommendations made by AANN or any other artificial intelligence software or system will be accurate.