Yesterday’s market shock was generally caused by the ongoing concern about Greece and the ability to keep them in the Euro. These are typically the kinds of things that do not change the underlying fundamentals and often create opportunity rather than a reason to panic. S&P Capital IQ published a 70-year historical analysis of past market shocks that found events like this produce an average decline of 2.4 percent on the next trading day, which has been recovered in an average of 14 trading days. 

S&P strategist Sam Stovall says, “As history has shown, prior market shocks have usually proven to be better opportunities to buy than bail, primarily because the events did not dramatically alter the course of global economic growth.”

We are seeing economic indicators continue to improve including employment, housing prices, new and existing home sales, etc. Housing prices for example increased 4.9% April to April and employers have added 3.1 million workers over the past 12 months.

There will be corrections in the broader context of this bull market, however, we remain bullish intermediate to longer term. We expected more volatility this year as we wrote about in our our January Quarterly Market Overview but, we believe the narrow range of the past few months will ultimately be resolved to the upside.

Royal Fund Management