Posted on July 1, 2011 by David Laidlaw

Even though the above scenario is a possibility, it is not the probable outcome.  The major stock indices have appreciated about 6% for the year. The basic theme with stocks is that corporate revenues are growing, albeit slowly, while earnings are still advancing nicely due to improving margins. We believe this trend will continue absent a major macro-economic shock. Earnings are predicted to grow about 14% above last year’s levels during the 2nd quarter when they are reported later this month.
Outside of the social networking sector (which is trading in extreme bubble territory and the topic for a future comment), stocks are attractively priced and their prospects look good. While bond yields have advanced slightly from the depressed levels they reached in June, bonds and money markets are not attractive options relative to high-quality stocks. 
During the quarter, we reduced the risk profile of the portfolios under our management. As always, please call us if you would like to review your portfolio to insure that the accounts reflect an appropriate level of risk taking. A degree of risk is necessary to provide for future growth, but it is also necessary to protect capital in volatile markets.