Another development last month was the Fed stating they are going to maintain low rates until mid 2014. Initially everyone was expecting rates to tick back up later this year as the economy started to show some signs of recovery. What does this all really mean? This is the Feds way of stating the economy is not recovering as fast as desired. They are hoping by keeping rates low for an extended period of time people and corporations will be encouraged to put their cash to work by…spending it and boosting the economy. The average U.S. saver is being punished by having their cash earn almost nothing while the price of many thinks keep rising. The true risk of this move by the Fed (like many of their moves) will not been seen in the next few months or later this year. Only time will tell if their strategy is correct. If the economy does not pick up as hoped and rates stay this low, the economy could face serious and risks heading into 2013. The bond market has actually rallied on the Fed’s news and more investors are moving to the longer end of the yield curve because they are assuming rates will not be rising in the near term.

While it is great to see the market rocket upward this month, we have to remember that a few weeks do not mean a lot in this market. We have seen this before only to be followed up with extreme volatility. With all the cautions I am mentioning though, it is great to see the US economy is slowly getting better and Europe seems to be trying to work out a resolution to their debt crisis. Will it all happen in an orderly fashion? We will soon find out.