Last week started out with early gains but quickly retreated as the week ended. With increasing tensions between Russia and Ukraine and earnings season in full swing investors are starting to react first and think second. We believe these “mood swing” market conditions may be with us for a while.

Earnings season will eventually end, but tensions in Russia and Ukraine will likely drag on for a while and then we will enter the peak mid-term election cycle. As you can imagine we will be blasted with 24 hour news coverage of politicians telling us all of the things wrong with the world.

It’s not all bad news out there. In fact there are many good things going on. Some of the recent positives include:

• Companies in large part have been providing favorable earnings reports (so far).
• Consumer optimism as measured by the Michigan Consumer Sentiment Index hit a 9 month high.
• We are seeing a rising demand for large-ticket items. The Census Bureau announced that hard good orders were up 2.6% in March. This is 30% higher than forecasted estimates.

Right now I’d love nothing more than to tell you we will have a repeat of 2013 this year in the market, I just don’t see that in the cards. At least not yet. While the economic data is positive and the economy continues it slow climb higher, we are starting to see signs of a “tired” market.

As a result of our research and the market indicators we use to track the health of the market, we have started our move to a more defensive position in our managed accounts.

With that said, we are NOT seeing the warning flags of an approaching recession. Right now our model shows less than a 5% chance of recession in the next 9 months. We are simply seeing a market that had a great run in 2013 and needs to catch its breath. As a result, we are shifting our portfolios to reflect the current market conditions.

To learn more, read our comments below in the section, “Navigating the Months Ahead”.

Performance Report:
CM Perf - 4.25.14



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