Stocks turned sharply lower in the second quarter, erasing all of the first quarter’s gains and leaving the S&P 500 down almost 7% through June 30th. Bonds, which are owned in part to protect against market downturns, did much better, returning between 2.5% – 7% depending on the particular municipal or taxable instrument. Subsequently, in July we saw the S&P 500 surge 7.0% to bring domestic equity markets basically back to where they were at the beginning of the year.
Our overall outlook is characterized by concern over the challenges faced by the global economy in the years ahead. In fact, sharp swings in stock prices this year reflect a sort of tug of war between improving fundamentals on one side and serious concerns about debt-related stresses and their potential to derail the fragile recovery on the other. The developed world must walk a tightrope as it deals with the pressing need to slow and ultimately reverse debt growth without also seriously harming economic growth. During these volatile economic times, it is imperative that you examine your true level of risk tolerance as you review your current financial plan and make any adjustments necessary to achieve your long term goals. As always, we are available to address any questions or concerns you may have.