Zacks, a well known research house and money manager released this update on corporate earnings for this quarter: “The first quarter earnings season has turned out to be much stronger relative to pre-season expectations. For the 60% of the companies that have already reported, total earnings growth is tracking 9.4% with roughly 71% coming out with positive surprises. Most of the growth is coming through revenue gains, with aggregate margins essentially flat from the year-earlier levels. This is a far cry from pre-season expectations, when earnings were expected to be down modestly from the year-earlier period.”

That, along with the US stock market trading today at 13,268 (Dow Ind. Ave.), is the good news. The worrisome news is again related to Europe. Yesterday, Spain joined a growing list of European countries that have entered recession as its economy contracted for the second consecutive quarter. A spreading recession, a consequence of austerity measures, may challenge Europe’s commitment to debt reduction and raise political risk for investors. Political change has raised the risk that European governments may back away from commitments to budget deficit reduction measures that are crucial to alleviate high debt burdens.

This week the ECB (European Central Bank) takes center stage as the political antidote to rising anti-austerity sentiment. The ECB could ease debt fears in a number of ways such as injecting more cash into the financial system and resuming government bond purchases. They could also cut interest rates or at least talk about the possibility of cutting interest rates. LPL Financial research thinks the latter is possible as the ECB in the past has waited until its hand is forced before they act.

Another economy of interest is China. They are expected to grow at 8.2% this year and 8.8% next year, and the consensus view is that China can achieve a soft landing in 2012 and 2013. But China has clearly moved into a new phase of its economic growth trajectory after GDP (Gross Domestic Product) growth surged over the past 10 years. Looking ahead, markets and global policy makers need to adjust to Chinese GDP growth of around 7.5% rather than the 11-12% growth seen in much of the 2000s.

So, despite good earnings reports, we believe a digestive phase for equity markets is possible in the near future. Europe and a slowing Chinese economy along with other concerns may have the effect of rebuilding the “wall of worry” bull markets climb. Further out, we do believe the bull market will continue and make higher highs and we at Legacy Wealth Planning are always looking for investments that attempt to participate in these markets in a suitable fashion for our clients.

- Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is an unmanaged index and cannot be invested into directly. Past performance is no guarantee of future results. LPL Financial Weekly Economic Commentary, LPL Financial Weekly Market Commentary and Don Hays Investment Newsletter, all dated 4/2/2012. LPL Financial Bond Market Perspective dated 5/1/12.

Greetings All:

As an investment community we still remain suspect. How can the market have the best quarterly performance since 1998 with a National debt at the highest it has ever been, a political machine running on “un-greased” bearings, unemployment still at a very high level and no clear picture from our Government as to how we are going to reduce spending and manage our debt? It is quite perplexing.

So here are some potential reasons for the markets strong performance this past quarter:

• The run of strong labor market data continues with nonfarm payroll growth over the past three months.
• Regional reports (states) reporting recent job gains that are also encouraging. Over the past year, the “sand states”—Arizona, California, Florida, and Nevada—as a group have gone from underperformers in terms of job growth to outperformers. These were the states with the biggest housing bubbles and consequently causing the most severe private sector financial damage. The fact that they are now creating jobs more rapidly than the nation as a whole suggests that the negative impact of these states is diminishing.
• Housing continues to strengthen.
• Interest rates, or the cost of money, remain low.
• Inflation is reported to be in check but I guess they may not be considering the cost of groceries, gas, possibly insurance – specifically medical and consumer goods – soap, tires, toothpaste, etc.
• A very accommodative Federal Reserve Board
• Accommodative European Central Bank and International Monetary Fund in helping to minimize problems in Europe.

That being said I guess we should conclude that all is “fine” in the ole US of A? Well… optimistic conclusion based upon some positive short term indicators might not dictate that we take action in the same manner based upon faith. Therefore I still maintain a cautious action plan.

Let me continue by looking at what might cause risks to financial strength and economic recovery:

• National Debt resulting from continued Government spending and failure to curtail that spending with the biggest issue being the Congressional budget debate.
• Oil and middle east tensions
• A slowing of the improvement within the unemployment rate – but improvement none the less.
• The Federal Reserve (Bernanke) saying that strains in global financial markets continue to pose significant downside risks to the economic outlook – reason they are keeping interest rates low.
• Continued uncertainty in Europe.

So…if any one of the above “risks” get, solved/managed/eliminated in a favorable manner, which you all know that in my optimistic world will happen in time, then the positives, albeit small, may continue to outweigh the negatives and the markets can continue their advance; up to November! You had to know there was a “but” coming.

They say election years are great and it is certainly starting out that way but I have very little time to evaluate and research politics so I will just have to let others provide summary information and formulate my advice around that. In that light, here are some comments out of Goldman Sachs regarding the issue of politics and election result scenarios:

• Market participants have begun to focus more on the fiscal “cliff” approaching at year end, when policies set to expire or take effect could impose roughly $600 billion (around 4% of GDP) in fiscal restraint if there is no congressional action. It is assumed, however, that the actual amount of $600 billion may be much lower.
• While there is a great deal of uncertainty regarding how potential political scenarios could shape policy outcomes as we approach the election and year end, it appears to us that the risk these policies could actually lapse in the first quarter of 2013 is greatest under a scenario where control of the House, Senate and/or White House changes hands. This may lead to unexpected fiscal restraint and policy uncertainty.
• By contrast, if political control stays the same, a “divided government”, then we may not see this potential fiscal restraint surface until sometime in 2013.

Basically for us as investors, this means continued uncertainty. Not supportive of strong investment markets that we would come to expect from a recovering and healthy economy. Isn’t it sad that politics are playing such a huge part of politics that negatively affect our lives and the lives of our families in the future. What ever happened to government for the people by the people? Seems today it is government for the people by the politicians that will best benefit themselves!

My thoughts? Presently I have developed a 5% downside target on the S&P 500 which as of Monday, April 2 was at 1350. What this means is that if the S&P starts to approach this level, I will begin discussing with each client the best investment approach and decisions in moving forward. As the S&P 500 hits new closing highs, then I adjust my April 2nd value upward. For each of you this has differing and varied meaning but it at least provides us and starting point for discussion and a potential plan. My suspicion is that the markets, economically driven, will continue to strengthen up until the election. Baring any global catastrophe or economic unknown that could always happen, I remain optimistic – imagine that – and I maintain we continue with our present investment plan.

I would like to thank those that have referred new clients to me over this past quarter. The consensus reasons are lacking customer service, good information and access to an advisor that will simply discuss thoughts and concerns in a relaxed, concerned and easy to understand manner. I may not always be right with my interpretations but I will take the time to help all understand and make sense of investing as it pertains to their specific situations. Please, do not hesitate to let others know of my work here. It can take several years to develop a financial relationship but I am willing to begin that journey with those you personally feel could benefit from my guidance.

I sign-off for now but remember if you have any questions, thoughts, concerns or needs regarding your investments, accounts, markets or things you read/hear within the media, give me a call so we can discuss.

Regards,

Martin

Martin McClellan

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The views expressed by Goldman Sach’s and Steamboat Financial Group do not necessarily reflect the views held by LPL Financial