Market Review: 1st Qtr review and 2nd Qtr preview

The market had a decent start to 2011.  We anticipated a correction in January; however it came 3 weeks later in mid February.  The correction lasted for 2 1/2 weeks and corrected 7.1% from top to bottom.  It appears the 2nd Quarter should be healthy for returns.  It may be volatile; however the trend should be up.  Large emerging markets (Brazil, India, and South Korea) had a tough First Quarter and now are coming back very strong.  Earnings season is about to start, and it appears the market will now target 13,000 on the DOW over the next 3 months.  We feel this is quite possible!  The Federal Reserve announcement of QE2 (Quantitative Easing) has supported market behavior and various risk classes.  Gold continues to rally as a “safe haven”, as do stocks that have well managed balance sheets.  We have constructed 3 equity models for our clients’ portfolios, and all three are doing well this year.  As you may notice at the gas pump, Oil has also gone up.  This is of some concern as it does put a strain on consumers and businesses; however, stocks are still reasonably priced in today’s environment.  We will be monitoring the Federal Reserve’s comments on QE2 very closely in the Second Quarter to see if they start to pull back on their support of the US economy.  It appears the first quarter correction is out of the way, and equities look primed for another strong quarter.  We will post another update in late June or July.  Markets can change overnight; so if our outlook changes, we will respond sooner rather than later.