Are we out of the woods yet?

My big question is: are we out of the woods yet? As investors, the biggest problem that we have experienced over the past six years is the high level of volatility in the stock market. Depending on good news or bad news, the stock market seemed to have had a knee jerk reaction to dispersed information. This has changed. Since the end of last year, the market has risen steadily. The only glitch was on February 25th, when the market took a rather big drop and then recovered. The “News Factor” is moving the market less, as we have seen with the bailout of Cypress. There is an old saying in the market: “the trend is your friend!” The trend appears to be upward. Looking at the long term, the U.S. Stock market appears poised for an extended rally as the economy continues to improve. I have no doubt that there will be bumps along the way, but moving forward, we want our clients fully invested in stocks relative to their risk tolerance. As I have noted in previous blogs, I still have concerns about the lasting value of intermediate to long-term bonds. At some point, the Federal Reserve will begin to allow interest rates to increase. When this happens, the principal value of bonds will begin to decrease. To mitigate this, we are using more short duration bonds in our mix. I am currently going through our clients’ asset allocations to make any necessary adjustments.