This truly has been a historic market over the last 12 months. This year in and of itself has been quite a ride, but where do we go from here?  The market has been stabilizing and trading in a range for the last month.  There still could be a bit more upside potential through the end of the year if we see the unemployment data stabilize. 

There has also been some data that shows California, Florida, Arizona and Nevada’s housing markets (which makes up about 50% of the housing market) is beginning to bottom out.  Also, don’t forget we have tons and tons of stimulus money (whether responsible or not) that still has to work its way through the economy.

The stomach churning swings we experienced in the market are not as frequent as in the past, and the Volatility Index has been going lower and lower.  Although the volatility is still relatively high by historical standards, the market does appear to be getting a little bit calmer.  Of course “calmer” to us is just a synonym for “directionless.”

Unless there is some game changing data over the summer, the market is not going to see any big swings until the Fall. What we have seen since the market lows on March 9th has been what some people call “the world is not ending rally,” or, “the faith rally.”  Warren Buffett said recently, “Everything that I see about the economy is that we've had no bounce.”

Deflation and Inflation are the dueling banjos in this economy, and inflation will win!  Though the current readings on inflation are pretty tame at the present time, the inflation fears later this year will be in high gear, and the Fed is certain to be raising rates in early to mid 2010.  It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S.