Economic Outlook

Consensus View Fluctuates Widely

In a replay of the spring of 2010, the U.S. economy has slowed in recent months, just when investors were becoming optimistic. Many indicators eased (jobless claims, PMI indexes, jobs), leading to soul-searching about an economic “slow patch” vs. a “double dip”. Meanwhile, inflation accelerated, with the headline number driven primarily by commodity prices worldwide.

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Equity Portfolios

Stocks Mark Time In Second Quarter

Corporate profits once again reached record levels. However, this impetus to stock prices has been diluted by other factors such as European debt crises, U.S. fiscal deficits and uncertainty over the direction of future earnings, inflation and interest rates. The net result was a flattish market over the quarter, with plentiful volatility in between.

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Fixed Income Portfolios

Rates Ease In The Second Quarter, Likely A Temporary Pause

Rates changed course in the second quarter and moved lower. This drop was most likely influenced by an air of uncertainty around Greece defaulting on its debt and the potential for other Eurozone countries to follow. On this side of the Atlantic, investors were likely seeking the (what we believe will be) temporary shelter of bonds as they wait and watch what happens to recently weak economic releases and the impact of the end of the Fed’s quantitative easing (QE2) stimulus.

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