Second Quarter 2010 Market Review

When will the financial storm clouds lift?  Even the most disciplined investors are asking themselves this very question, as they continue to endure a seemingly endless supply of bad news.  

High unemployment, sovereign debt fears, health care and financial reform, budget deficits, an uncertain tax code, a massive oil spill and political bantering are all creating a perception of uncertainty and chaos—especially in the financial markets.

During the second quarter, the equity markets reacted adversely to the realization that global economic growth would not experience the rapid recovery that many had hoped.  Although corporate earnings improved somewhat, job creation in the private sector experienced only modest gains.

The fixed income markets (bonds) continued to advance, as investors’ appetite for "safe-haven” investments strengthened.  As we have noted on a number of occasions, we believe that bond investors’ willingness to accept low yields in an exceedingly low interest rate environment will prove to be a perilous decision when interest rates adjust to more normalized levels. 

We believe that the headlines will likely remain negative for some time as the global economy evolves.  However, those investors who can separate themselves from the crowd by making investment decisions that ignore—and are actually contrary to—the popular sentiment, should be rewarded by superior investment results.

As a reminder, making important long term financial decisions requires the discipline to ignore the noise of the moment in order to recognize the opportunity of the future.  While there are certainly challenges that lie ahead (and there always will be), we believe that an investment approach formulated within the context of a comprehensive financial plan will provide the peace of mind necessary to ensure a favorable outcome.

Please do not hesitate to contact our office if you have any questions or would like to discuss your financial circumstances in more detail.  Have a great summer!

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