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May 18th Commentary

Markets Taking a Breather

May’s market so far has been much like the weather in the Philadelphia area — soggy. With high gas prices, a continued debt crisis in Europe and mixed corporate earnings reports, investors have reduced their appetite for risk in the most recent trading sessions. The result has been a sell-off in areas that have shown the greatest strength over the past few months.

Stocks, oil, gold and silver have pulled back from recent highs as investors fear that a recovery in economic growth may be slower than expected and that commodity price speculation may have exceeded justifiable levels. The S&P 500 is off roughly 2.5% in May and commodities have seen as much as a 25% pullback from where they traded a couple weeks ago.

With the S&P 500 on a two-year bull run, there has been an expectation of a healthy pullback in the markets for the last few months. Looking forward, the positive points are that the majority of corporate earnings have been strong and, if commodity prices continue to decline, the fear of high prices constraining the consumer could fade. If the economy keeps on its current growth pattern, it is realistic that we will see the markets continue their upward climb throughout the end of the year.

I am confident that a well-balanced mix of equities, bonds and commodities will allow investors to buffer short-term volatility until the market uncertainties work themselves out.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering any market uncertainties.

Jason M. Vavra, CPA, PFS

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.