June reminds us, this is not the way the world works. Every major market index posted negative returns for the month as global and domestic events were absorbed by the stock, bond and commodity markets.

Here at home, the Federal Reserve introduced us to the concept of tapering. Chairman Bernanke said the Fed would begin tapering bond purchases later this year, if the economic data continues to improve. While he stressed several times that “policy is not pre-determined”, the market heard the Fed will be removing the economic training wheels and the market began to tip. The FOMC said they will continue to buy $85 billion in U.S. Treasury and mortgage-backed bonds each month, but at some point in the future the market will need to ride under its own power.

Global economies are struggling too. An economic slowdown in China, political unrest in Brazil, protests in Egypt, record central bank stimulus in Japan and a sluggish European Union depressed values in most international markets. All of these factors coupled with a strong U.S. dollar hurt both international stocks and bonds.

For those investors who thought gold was the single best answer in a world of uncertainty, think again. The precious metal fell 14.68 percent in June alone and has declined over 23 percent in the last year.

Despite the recent pullback in stock prices, the outlook is still positive in our view. The next round of quarterly corporate earnings reports will dictate the market’s near term direction. At the present time, we view stocks as fairly valued on a historical price earnings ratio. Corporate earnings need to keep pace justifying the current valuations. If they do, stock prices will rise from here, if they disappoint a June repeat is a distinct possibility.

For the past year we have been telling anyone who will listen to lower your expectation for bond returns. Five and six percent annual returns in the bond market of the past five, ten and fifteen years cannot mathematically continue. At the beginning of the year we said a one to three percent “earn the coupon” year will be a good one for bonds. After the first six months of 2013, if the bond market manages to avoid its first negative return year since 1994, it will be a good year. While the interest rate rise is real and bond prices are lower, bonds on a forward looking basis are more attractive today than they were four weeks ago.