It’s all too easy to project our current circumstances into the future and assume that things will remain the same forever. We find this phenomenon particularly true the longer a current trend, good or bad, persists. Remember how the “Internet changed everything?” In the late nineties stock valuations were at all-time highs, ‘twenty-somethings’ became overnight billionaires with dot.com ideas that required an ever increasing suspension of reality (and gravity). Even seasoned CEO’s who remain heads today of companies like Cisco, Intel, Apple, and Broadcom said then, that they could barely believe what was happening themselves; the orders were there – the growth was real. Then, all of a sudden the orders went away. The Y2K bug had not bitten. Information companies were indeed subject to the same business cycle as the rest of the economy. And the silliness of most new dot coms was exposed. It all came crashing down. Wall Street analysts who had months earlier championed the record high stock multiples as the new reality were summarily fired. The few who were too deeply involved with large investment banking customers stayed on, but quickly changed their tune. The reality changed overnight.

Equity markets continue to cool as investors consider whether the meteoric rally starting in March was overly optimistic. The S&P 500 run-up of nearly 40% from March 9th to June 12th is now 6.8% below its high point. The MSCI Emerging market index is 8.75% off its high, also reached on June 12th, but that index rose 72% from its depths in March on signs of greater economic strength in developing economies. It is becoming clear that the world is emerging from the worst economic slump since WWII, but just how fast remains in question.

Stocks posted their best quarter since 2003 as the second quarter came to an end. Stocks held on to the majority of their increase as the S&P 500-stock index finished the quarter up 15% and the year up 1.8%. As investors who missed the rally buy on dips, the vast majority feel the best is behind until the economy can prove it is up to expectations. The next big test is corporate profits for the second quarter which will be released in the coming weeks. They must match or beat analysts’ projections to sustain stock prices at current levels.

In the days of sailing ships one of a captain’s greatest fears was being becalmed in the Doldrums. Ships could be trapped for weeks without sign or hope of a breeze powerful or consistent enough to propel them safely out of the morass. These regions exist at the earth’s equator and are characterized by extreme low pressures, where the prevailing winds are calm and variable.