Consolidation of recent gains has been expected for awhile. We characterize it as a normal “backing & filling” process that will be healthy and make the next move up more sustainable. Several reasons for the weakness are being discussed including a weak economic number out of China, a rumor of a credit rating cut in Germany and a weak earnings report from Bank of America. However, earnings for the quarter have generally been good including good earnings from high profile companies like Coca Cola and Intel. We expect the current pullback to be relatively short and shallow and expect new money flows to continue to see this as opportunity rather then a reason to panic. Earnings are still reasonably valued and with low interest rates and the amount of liquidity available to the market, we believe the market will recover soon and be higher as the year progresses.
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