During the quarter, equity markets struggled for direction, but the S&P 500 ended the period with a positive return, closing at a nearrecord of 2,067. The technology-heavy NASDAQ index finally brokethe 5,000 level, last seen 15 years ago during the tech bubble. The U.S. economy continues to expand at a modest pace, and the employment picture has improved. Yet inflation remains at uncomfortably low levels around the world, and deflationary pressures have increased. The U.S. dollar has appreciated considerably versus other major currencies, and the translation effect is having a significant impact on earnings. These factors may slow the timing and reduce the magnitude of the Federal Reserve's increase of interest rates. We continue to position portfolios for modest economic growth, although we expect volatility to remain elevated.
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