On the heels of the economic and market recovery in 2009, many investors hoped that the economy and markets would continue to behave in 2010. The first quarter of the year certainly did not disappoint, with the markets posting a strong 5.6% gain.

However, without much warning, the markets changed course as several issues rapidly emerged during the second quarter, including:

• Fear of the Greece debt crisis causing contagion in Europe
• Fear of a housing bubble in China<
• “Flash Crash” in US markets in which stocks fell sharply in minutes
• BP Oil spill

As we enter the second half of the year, we believe the economy is in the final act of a three-stage recovery. The first act included the massive bailout of the financial system on the brink of collapse, followed by a second act featuring record fiscal and monetary stimulus to spur economic growth. The third and final act is much more challenging and is likely to play out over many years. It requires the economy to grow organically without the benefit of extreme, artificial stimulus. There is no doubt that economic and market volatility will continue to be the norm.

Given the uncertain economic and market outlooks, investors are facing a bit of a conundrum. Despite the correction, stocks are still not cheap by our measures, and almost certainly will remain volatile. On the other hand, sitting on the sidelines in cash means accepting anemic yields that produce negative real returns after-inflation returns).

Rather than trading off between these two unattractive extremes, we believe our clients are best served by following a diversified approach to investing. By incorporating strategies less correlated to the general markets, our diversified portfolios tend to limit volatility and produce more consistent returns over time. While there are no silver bullets, we feel our disciplined approach will produce attractive risk-adjusted returns and allow our clients to focus on their long term goals.

Bridgeview Wealth Management offers its advice through MPS LORIA Financial Planners, LLC, an independent, experienced financial planning firm committed to understanding each client’s unique needs.