2nd Quarter Client Note

This quarter’s equity market performance was characterized by significant volatility. Following an upward move in April, the market fell steadily for nearly two months. A strong rally in the last week of June left the S & P 500 with a fractional loss (-.10%, including dividends) for the quarter.

Other asset classes were all over the map. Bonds had a strong performance, especially considering how low interest rates already were. International stocks were up slightly. Real estate had a particularly strong quarter, while natural resources fell for the first time in a while. Interestingly, while large cap value stocks in general incurred a small loss, companies emphasizing dividend payments had a decent gain. The Dow Jones Select Dividend Index was up 1.8%.

There is — and has been– plenty of bad news out there on which investors could make a forecast that the market is headed lower. The internet and 24 hour cable news cycle makes it impossible to avoid. It’s all anybody wants to talk about. But I have also observed a good number of data points, valuation metrics and arguments as to why the market is reasonably priced. People always ask me why I don’t specifically discuss these things.  As much as I do not want to stress or ratify people’s negative views of the market, I don’t want to appear overly optimistic, either. Remember, these competing views play themselves out in the crucible of the market every minute of every day – resulting in the price stand-off  (equilibrium)  that exists when the traders turn off their screens and head home to their families.

So, rather than be caught in the whipsaw, in my view is better to be neither bullish nor bearish, but to adopt an asset allocation that will weather any environment.

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