Economic DevelopmentsUnrest in Syria and Iraq due to the radical Sunni militants known as ISIS could inject volatility back into the markets at a moment's notice. Thus far it seems markets have shrugged off any effect that this could have on oil prices however that could change quickly and dramatically. Also, the Federal Reserve continues to stay the course on its plan to scale back the asset purchase program known as "QE" by reducing purchases by another $10 billion per month. It is still too soon to determine what long term affects either of these situations will have on the markets; however we'll monitor each closely. Employment data in the US continues to improve as the unemployment rate has come down to 6.1% and the economy seems to be consistently adding over 200k jobs per month. A strengthening job market, and thus a stronger consumer, would be a tailwind to the market and could push prices higher. Earnings season is about to begin and should determine the trend in the third quarter. Analyst expectations have come down a bit recently and it will be interesting to see how many companies are able to beat the reduced expectations. Active risk management and prudent investing should be increasingly important to make sure assets are protected through these market environments. Current Portfolio As of 6/30/2014 the portfolio was invested in all 9 sectors of the S&P 500, along with short exposure to volatility (VXX). As of 7/11/2014 (today) we haven't made any changes to those allocations. Because we run systematic, model based portfolios we don't make market or sector predictions, however we'll state that there is a small buffer before any of the equity sectors would be removed from our portfolios and the volatility position doesn't look quite as attractive now as it did over the course of last quarter. An increase in the volatility of any sectors, a sustained move downward in price, or a combination of the two could result in there being dramatic and quick changes in the portfolio.
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