Spring Letter To Clients {Part II}

Please find Part II of our Spring Letter to our clients below.  {Bullet points are highlighted}

The counter argument shown in the chart* below takes a much longer view.  It notes that markets have spent nearly fourteen years consolidating the previous bull market.  That era ended with a speculative technology bubble in 2000.  This camp points out that stocks broke out from the previous decade’s trading range last year.  They suggest this breakout presages a longer bullish run for stocks than most currently suspect.  This side can point to an economy that is still expanding, low inflation, low interest rates and a market valuation that while elevated, is not at the speculative overall levels seen at previous highs.

We think there is some merit to both arguments.  As investors of your assets, we take a longer strategic view and are therefore in the bullish camp.  Shorter term, a certain level of cautiousness may be warranted. Stocks began 2013 largely undervalued on a historical basis. Now stocks are trading at the higher end of their valuation ranges. While that does not preclude higher prices {especially in a low interest rate environment}, probability would suggest that it could limit short-term performance, at least until investors are better able to gauge the economy.

*"JP Morgan Guide to the Markets 2Q|2014", March 31,2014:  Charts are compiled by JP Morgan Asset Management and are an excellent quarterly view of different asset classes.  You can access the series here 

**Long ETFs related to the S&P 500 in Client and personal accounts although positions can change at any time.