We ended the 2012 first quarter with a bang. All markets posted higher gains and the S&P 500 hits the May 2008 high. The markets have been very resilient during the first quarter, with some lackluster numbers coming in during March ,with housing prices falling and gas prices rising along side of Euro Crisis. So, what’s keeping the markets higher? It is a combination of valuation on the underlying stocks being favorable and a ton of cash still waiting to climb in. Each time we see the pullback, the cash runs to get in on some sales. This should continue as we move into the summer, but expect to still see some pullbacks that could touch 5%-7%.
This market has been less volatile and brought a sense of comfort to investors and that is good. We have not seen the huge moves of 200+ points up or down. We should begin to see bonds yields move a bit higher as investors look for more risk and pull out of treasuries. This will bring some negative movements to the bond/ fixed income portion of the portfolios. This is even more of a reason to maintain your allocations and be disciplined the rest of the year.