Stocks have extended their gains into the second quarter and through the beginning of July. In January we observed that the overall environment was changing from a year ago. We cited the attractiveness of Value stocks and Small Cap stocks and these groups have led the dramatic market recovery since February 11th, positively impacting our performance.
Fortunately the worries surrounding the Brexit vote in Great Britain have dissipated. If anything, U.S. equities continue to be viewed as safer and more secure than ever. Economic news has become more positive; consumer confidence and retail sales have ticked up. We think second quarter earnings should be better than expected simply due to foreign currency reversals and energy pricing improvement.
Amidst the market rally and good economic news there continue to be net flows out of Equity Mutual Funds this year of $83 billion. While we have reached record market highs, the prevailing views are anything but speculative and euphoric. There is still a great deal of money on the side lines to fuel a continued Stock Market rally and we see the potential for funds continuing to be withdrawn from fixed income given the low returns and from Hedge Funds as a result of continued disappointing performance.