It’s still too early to say, but economically speaking 2008 may be the year of the recession that never was. From our vantage point, it hardly matters whether the U.S. economy contracted in 2008 or not. The fact is, growth has declined to nearly zero and while “core” inflation numbers have been benign, the consumer is all too aware of rising energy and food prices. Under this backdrop, the real headline is that fundamentals are actually holding up surprisingly well. Yes, consumer spending has slowed. Yes, housing is still in a slump, but the potential disaster of the credit crisis appears to have abated and our positive comments regarding anticipated improvements in the markets back at the end of February appear prescient.

Over the month of April we began reinvesting a large portion of cash back into equities. Our principal focus has been in technology, banking, industrials, commodities and selected foreign securities. We are certainly not out of the woods, and we anticipate a very sluggish economy for the balance of the year. We’re not bullish on much of anything related to the consumer and still believe that there is economic risk but we believe that the market is appropriately discounting the negative.

Importantly, with a likely cessation of interest rate reductions by the Fed, the dollar has stabilized. While a material rebound in the near-term is unlikely, this will help stabilize energy and commodities cost. The reduced value of the dollar has greatly stimulated exports and has significantly buoyed the performance of many of the U.S. companies with large sales abroad.

There has been a lot of doom and gloom bandied about, particularly by the sensationalistic nature of our media. Many of our clients are extremely nervous and concerned regarding the financial outlook. We are cautious by nature and by necessity but believe that the market has discounted a more negative scenario for 2008 than has materialized. We expect this to be a sub-par year for equities, but we would not at all be surprised to see this rally continue to where we started the year effectively erasing the losses. And if you were able to reduce equity holdings back last fall, it’s a good time to buy in the right sectors. At least that’s what we’re doing.