In our view, the market remains in a Fed-induced, liquidity-driven bull market that is likely to stay in place until rising interest rates, higher valuations and too much optimism cause another bear market. This could potentially take place in the second half of 2011.

The market has weathered the near-term concerns it is currently faced with (Mideast upheaval, the disaster in Japan, and the European debt crisis) correcting overbought conditions and overly optimistic sentiment. We are not convinced we have the all-clear signal on these risks in the near term, but we view further pullbacks as buying opportunities. We expect interest rates to rise as concerns over Japan and the Middle East abate.

Kanaly Trust CIO James Shelton was a guest on CNBC “Squawk on the Street” this morning, and discussed these and other market viewpoints, live from the NYSE.


james-shelton

Watch the segment.

Disclosures

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.