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Good Harbor Strategy Market Commentary

May 5, 2010

Commentary: If you’re a bull or bear, April certainly provided ample evidence to support your case. On one hand solid earnings reports from a number of companies, an encouraging GDP print and signs of improving consumer sentiment and spending provide evidence of a strengthening economy. This was further reflected in the economic indicators we monitor: an increase in output level and a respectable growth rate reading. Coupled with exceptionally strong stock market momentum, we have reason to suspect decreasing risk premiums and a continued equity rally. However, market action in the closing days of April give reason for pause. Sovereign debt concerns with the downgrading of Greece, Portugal and Spain, led to significant increases in VIX levels (albeit from levels in the mid teens) and a slight widening in credit spreads. Combined with an overall flattening of the U.S. treasury curve this is certainly concerning. In the end though, the strength in equity market momentum, particularly in small cap stocks wins out. Therefore we remain fully allocated to equities for May per the Good Harbor U.S. Tactical model.

Neil Peplinski, CFA

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