May 2014 was truly one for the record books. U.S. large cap markets posted multiple new intra-day and closing highs (6 for the S&P 500 after 45 during 2013) while yields on 10-year U.S. T-bonds fell below their 2.5% post-Bernanke ‘taper tantrum’ of May 22, 2013. On the surface, it seems unimaginable to enter the 6th year of an economic recovery and have stocks reach record highs while yields hit 52-week lows, serving to flatten the yield curve…

Despite April’s continuing trend of mostly weaker U.S. economic data – which may or may not still be attributed to the weather – positive fund flows have kept most global equity indices in the green, not due to investor conviction but as a result of seeing few alternatives to stocks. Investor sentiment readings have become more neutral as investors ponder what pace of economic growth will be required to justify current stock valuations. Clearly the jury is still out…

Three items have played havoc with markets year to date: weather, falling inflation and disappointing capital spending. The weather speaks for itself, and is uncorrelated to the other two variables; hence markets are likely to give most companies a “free pass”…

After putting in a short term trading bottom with the delicacy of a thud on February 1st, a day the S&P fell 2.2%, a number of reasons explain the strong equity rally during the remainder of the month...