The S&P 500 continued its advance in the third quarter reaching record highs in early August. Strong manufacturing data and better than expected second quarter earnings reports helped propel the S&P 500 through the 1,700 level for the first time ever. The earnings growth rate for the index in the second quarter of +2.1% year over year was considerably better than forecasts and marked the third consecutive quarter of positive earnings growth. The market’s focus then shifted to rising bond yields as better economic data spurred concerns that the U.S. Federal Reserve (“the Fed”) would reduce (“taper”) its $85-billion-per-month bond buying program in September, which would be sooner than market expectations, The bond buying program is aimed at keeping borrowing costs down and fueling the economy. News about chemical weapons attacks against civilians in Syria onAugust 21st added to the geopolitical nervousness in the markets as the likelihood of a retaliatory strike against Syrian President Bashar al-Assad’s forces grew. Gold spiked up through $1,400 per ounce and oil rose over $110 per barrel, while the S&P 500 pulled back almost 5% from its early August highs.

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