The U.S. Equity Markets have continued their uptrend during the first quarter of 2010, marking the fourth consecutive set of quarterly gains. This represents a rather infrequent occurrence, since in the past 50 years, the S&P 500 has done this only thirteen times. The S&P 500 was up 5.39% year to date, the Dow Jones Industrial Average was up 4.82% and The Barclay Aggregate Bond Index was up 1.78%.

It is interesting what a difference a year makes. It has been a year since the U.S Stock Market made its bottom, instilling an incredible amount of fear among investors. It seems that the jitters that existed last year, particularly over concerns about an economic recovery following the financial crisis, left many market participants expecting further equity market setbacks which did not occur. Many investors are still trying to play catch up by putting money back to work from the sidelines.

According to a Federal Reserve Bank of St. Louis report, the recession ended in July 2009 as most had anticipated. This conclusion was drawn from a review of prior recessions and looking at certain economic variables. It is interesting to note that the early stage of this current recovery has been driven primarily by private investments and exports whereas prior recoveries have been primarily driven by personal consumption, real income and employment. The significance is that this recovery has less visibility and is being felt less by the average investor. It is a recovery nonetheless and certainly our U.S. Equity Markets have reflected it.

The expectation is for a sustained global economic expansion, with the US leading among the major industrial countries. Real GDP growth should however remain subpar relative to prior recoveries from such severe recessions. Nonetheless Real GDP grew at a 4 percent annualized pace in the second half of 2009. The major concerns continue to be the housing sector, unemployment, inflation concerns over the excess liquidity in the system and a potential interest rate spike in response to high deficits. There is always plenty to worry about, that seems to never change.

We are early in this economic recovery and while the stock market is not immune to corrections, we haven't reached any euphoric levels and there hasn't been an abundance of optimism, which we see as a good thing. A lot of investors have been shaken by the turn of events during the past couple of years, understandably so, and have yet to fully embrace a positive outlook. With massive cash still on the sidelines and at very high levels relative to GDP historically, the potential to take this market to a higher level is there.

Corporate America is in better shape than many perceive. Company earnings have managed to continue to exceed expectations. This is certainly the result of companies scaling back in preparation for the worst, which did not materialize. Productivity gains have made a significant contribution to earnings. Given the inherent profit leverage for many companies, any decent revenue expansion during the recovery should dramatically hit the bottom line and justify even higher stock prices.

As you continue to feel bombarded from the media by conjecture about the economy, it helps to try to remain focused on the long term. It seems that the equity markets have come back pretty quickly and along with that comes the expectation of a correction. Those will always be part of the landscape. The best opportunities aren't typically present when it is obvious to everyone.

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