The market continues to grind higher as the S&P 500 approaches a new high despite slow global growth. One of the drivers of the market has been decent earnings. So far 93% of companies have reported first quarter earnings numbers with 71% beating their earnings estimates and 45% beating on sales. In terms of valuations, the current forward P/E ratio is 16.8. This P/E ratio is above the 5 year average (13.8) and the 10 year average (14.1). We are starting to sense that the market is pricing in better growth prospects around the world. When we look to the second half of the year we see an environment of reaccelerating global growth boosted by global monetary easing. For this reason we have been recommending investors increase exposure to both developed international as well as emerging markets as valuations in these markets appear more favorable and quantitative easing should provide a lift to risk assets as it did here in the US. In the bond market we are starting to see some negative price movements as markets begin to price in the possibility of higher interest rates before the end of the year. We expect this trend to continue which is why we have positioned our client’s portfolios on the short end of the yield curve and invested primarily in individual bonds with defined maturity dates. Additionally we remain constructive on credit spread products including investment grade and high yield corporate bonds. Overall this sounds like pretty good environment to be investing in stocks so you may be asking what if anything are we worried about ? One of our concerns is the length of this uptrend. Global markets usually don’t rally for this long without corrections of 10%,15% or even 20%. The longer the ascent continues and the more stretched valuations become, the more severe the correction. As stated earlier we do think growth begins to pick up later in the year so in our view the most likely event that could cause this long awaited pullback is a rise in interest rates. More specifically the speed at which rates rise will likely be more important than their actual levels. We must also keep in mind that markets are forward looking so stocks could react even before we reach troublesome levels. This concern is why we reduced stock exposure in our portfolios from an overweight position to equal weight relative to the targets. We will continue to monitor these conditions and make adjustments as necessary. Thank you for your continued trust and confidence as we continue to do our very best to navigate these markets on your behalf.