MARKET PERFORMANCE

In the first quarter of 2013 the equity markets threw all caution to the wind and ended the quarter at new record highs.  Threatened effects of “Sequestration”, anemic corporate earnings growth, and restrained optimism of corporate leaders were largely ignored as volatility remained at post crisis lows.  The market has gone 90 trading days without a 5% or greater downturn, and 374 days without a correction of 10% or more.

The recent rally is further evidence that markets tend to climb a wall of worry.  Moreover, even as markets have erased all of their crisis losses, investors are still cautious.  According to the American Association of Individual Investors, investors are carrying cash at 16 month highs.  Corrections usually take place once there is nobody left on the sidelines to get in.

In spite of a tepid outlook for earnings and economic growth, combined with continuous fiscal neglect, the markets may very well continue to create their own reality for the duration of the year.