May has proven to be a rather unpleasant month for financial markets, particularly on the equity side. Through Tuesday night, all of the major equity indexes were down for the month at least 6%. For most indexes the declines were "corrections" as the indexes declined more than 10% from their intra-month peaks. We've been talking about a market correction since November as we believed optimistic earnings expectations were inconsistent with global economic data. While we didn't specifically have in mind the potential Greek default and subsequent global fallout, we did believe the markets would be forced to reconcile earnings with economic expectations. To a degree, that has now happened. Unfortunately, we remain skeptical as to whether or not the process is complete. Global economic growth is likely to remain subdued for the near term (through 2011) as most developed economies attempt to rein in spending and demonstrate at least some degree of fiscal constraint.

This new sense of responsibility won't be beneficial to the United States as a strong dollar and weak global growth will negatively impact U.S. growth. And that's without considering weakening real estate markets, tighter lending standards, fiscal irresponsibility among most state governments, continued high unemployment, etc. Consequently, we remain concerned about equity market performance over the next 12-18 months and expect that we could see low returns over the next twelve months. We wouldn't be surprised if the majority of total return was income-oriented.