We often write about how our tactical asset allocation investment process seeks to use shorter-term market price volatility to our long-term advantage. Of course, while it is easy enough to say volatility creates opportunity, the reality is that volatility can be stressful and painful when you are actually experiencing it in your portfolio.

U.S. stocks resumed their positive streak in July (after a slightly negative June). Large-cap stocks rose in three out of the four weeks and were up 5% for the month. Smaller companies generally outperformed their larger-cap counterparts. After Federal Reserve comments regarding the timing of its stimulus withdrawal upset markets in May and June (particularly the bond market), investors seemed to take comfort in the Feds more recent comments. Among other points, Chairman Bernanke reiterated that a decision to taper bond purchases is different from raising the federal funds rate

We have argued recently that the current rally is largely dependent on US economic performance, since Europe's crisis is not going to be solved anytime soon. On that basis, Friday's reports of mixed and lacklustre data for US employment may not seem overly confidence-boosting. The household survey showed the unemployment rate unexpectedly ticked down from 9.1% to a six-month low of 9.0% in October; but the establishment survey disappointed, showing total nonfarm payrolls grew +80K last month Beyond these headline figures, however, we found the report supportive of our major current themes.