AFAM

It was a miserable week, what with the Boston bombings, lockdown and shootout, the horrific fertilizer plant explosion in Texas and the ricin-laden letters sent to elected officials providing vivid reminders that we still live in a dangerous world. True, the week ended about as well as it could as Friday nights incredible drama in Watertown brought some closure in Boston and the come-from-behind victory for the Red Sox on Saturday was right out of Hollywooda three-run go-ahead home run after Neil Diamond leads Fenway Park in a rendition of Sweet Caroline!

It was an up and down week, though it managed to end in the black for just about all of the major market averages, save for the Dow Jones Industrial Average. Of course, the big headline on CNBC.com after Fridays close was, "Dow Logs First Weekly Loss in 2013." Thats fine by us, as we were happy with the 0.5% or so gains posted for the week across our four newsletter portfolios!

While we know better than to make too much out of a low-volume rally, especially during a holiday-shortened trading week, it was interesting to hear what The Wall Street Journal had to say one week ago at this time. As the publication helped ready investors for the week ahead, one story advised folks to head toward the safety of U.S. Treasury securities: "Expect safe-haven Treasurys to draw demand at the expense of stocks in the coming weeks, bucking a seasonal trend that has often favored riskier assets."

As Mark Twain once said, Facts are stubborn, but statistics are more pliable. More examples emerged last week in support of that center box quotation from this months edition of The Prudent Speculator. Indeed, Fridays monthly jobs report provided plenty of fodder for both the Obama & Romney election campaigns as the former was able to trumpet the eyebrow-raising dip in the unemployment rate to 7.8% (calculated from a survey of 60,000 individual households) while the latter could point to the less-than-stellar creation of only 114,000 jobs during September.

What was shaping up as a fine week ended with a really crummy Friday that included the horrific movie-theatre massacre in Colorado and, on an entirely different plane, yet another act (the Spanish region of Valencia asked for government help, while Madrid again lowered its economic projections) in the long-playing European sovereign debt crisis that caused yields on the 10-year Spanish bond to move further above the important 7% threshold.

While the major market averages ended in the red, though only modestly so, there was plenty of volatility in a holiday-shortened trading week that was replete with the release of quite a few economic statistics.

It would have been a nice week if it wasnt for the big plunge on Thursday as that days 250-point drop in the Dow Jones Industrial Average interrupted a solid stretch in which market breadth had been quite favorable. In fact, the other four days last week saw more advancing stocks than declining stocks, looking at the New York Composite Daily Breadth statistics from this weekends Barrons Magazine.

Though the dates do not coincide, as there is a lag in the Investment Company Institute data, last weeks rally in stocks was accompanied by word that for the first time in seemingly forever, mutual fund investors actually put more money into domestic equity funds than they took out, while the reverse was true for bond funds. Because it is only one week and Memorial Day was part of those ICI numbers, we hesitate to say that the tide is finally turning in terms of investor sentiment.

Plenty of uncertainty surrounds developments in Europe, so Ive chosen to pen this Memorial Day version of our Market Commentary on Monday afternoon rather than the usual Sunday evening. Of course, had the U.S. stock markets been open today, we might have seen a modest advance, given that the equity futures were suggesting that gains of some 40 or 50 Dow Jones Industrial Average points would be in the cards when trading resumes.

he social media giant ended its first day of trading up a measly 23 cents, or 0.6% from its $38 offering price, and technical difficulties at Nasdaq delayed the opening of trading and impacted market activity throughout the day, I give kudos to the underwriters for actually pricing the deal as best they could to match the relatively limited supply to the unprecedented demand. Certainly, Facebook could eventually grow into its lofty valuation, but it is eye-opening to think the disappointing first day of trading still left the company with a $100 billion+ market capitalization.

The labor report issued by the U.S. Bureau of Labor Statistics found that nonfarm payroll employment rose by 115,000 in April, and that the unemployment rate dropped to 8.1%. The improvement in the jobless rate came about only because 342,000 folks left the workforce, so there was little cause for cheer, even though the rate stood at 9.0% in April 2011 and 9.9% in April 2010. Employment increased in professional and business services, retail trade and health care, but declined in transportation and warehousing, while the private sector added 130,000 jobs and government payrolls fell by 15,000.

Last week was quite an interesting week, with investor darling Apple Computer shedding another 5.3% of its value after losing 4.5% in the week prior, the latest economic numbers generally coming in a bit weaker than expected and first quarter earnings reporting season getting off to a solid start. Happily, though there was no shortage of daily volatility, the major market averages all ended in the green, which rebounded by 1.4%. While Apple is not a Dow component, it presence in the Russell 3000 and the S&P 500 did not help those indexes, each of which turned in returns of less than 0.7%.

Though we were reminded the last couple of weeks that equity prices dont simply go straight up and we know that a 3% to 5% pullback is overdue, we remain optimistic about the long-term prospects for our broadly diversified portfolios of undervalued stocks. Our rationale remains unchanged. Economic data has been improving (Q4 GDP Growth came in at 3.0%, while Gross Domestic Income increased 4.4%). Valuations are generally not rich, especially considering the incredibly low interest rate environment and the strength of corporate balance sheets.

Given that the equity markets have been overdue for at least some sort of a pullback, we cant complain too much about the modest three-day selloff that occurred midweek, especially when stocks bounced back nicely on Friday. True, the Dow Jones Industrial Average fell over 150 points on the week, but losses in the other major indexes were generally smaller and with the equity futures on Sunday night signaling that trading in the new week will get off to a decent start, we might argue that last weeks action was a pause that refreshes as opposed to a warning shot across the bow.

Have to say that I chuckled a bit when I read in Saturdays New York Times that most professional investors think that a black swan event is possible, even as a black swan was described as an unlikely event that too few people plan for! The comments accompanied a piece entitled, A Forecast for Low Returns, in which several investment pros put forth the argument that people should plan for single-digit investment returns for the next five to as many as 20 years.