The Tide Should Continue to Rise
The S&P 500 was pummeled in May dropping 8% and now stands at a negative 1.03% for the year. Please see the Performance Page for our results. While the fundamentals continued to improve on the home front, the problems in Greece and fears of contagion to the other Club Med countries proved too much for a market looking for an excuse to correct. Whether the correction is just that or the start of a new cyclical bear market is subject to much debate. Here are some thoughts largely supplied by BCA, Lowry, Pollitt & Co. and Marc Faber.
Sustained but moderate growth should keep inflation low and allow central banks to avoid tightening anytime soon: bullish for stocks.
China, through monetary restrictions, appears to have successfully slowed the housing bubble, paving the way for a probable soft landing. This should allow China to begin easing with bullish implications for China as well as other emerging market trading partners.
Fundamentals for all major fiat currencies look poor with the US dollar the strongest in relative terms. In absolute terms, I would argue that gold may well become the perceived default currency of the future.
From a technical perspective, it would appear that we remain in a cyclical uptrend. In the seventy-two years of Lowry statistics, no bear market has begun without a narrowing of market leadership.
In sum, between Greece and other Mediterranean countries, the BP oil spill, continued high unemployment, and record deficits in the G7 countries, the return of volatility is likely to be with us for some time. As stated before, however, I think we're in the second phase of the cyclical bull market with rough water but a tide that should continue to rise.
-Joe