Financial reporters were getting a little worked up today as the S&P sold off nearly 2%, the biggest decline in three months. The scary news?  None, really.  Just inflation and rising interest rates.  Corporate America isn’t falling off a cliff.

So is it a routine selloff, soon to quiet down, or the beginning of something bigger?  Yes.  Synthetic Systems sees stocks basically holding their own for now.  But due to the dollar gaining ground, that means broadly declining prices.  In dollar terms, they’re just slowly zig-zagging their way lower.  Yet this is likely prelude to serious selling later this year.

For the time being, it’s the bond market that’s in the dog house.  

Where to hide?  I like cash, gold, cash, copper, cash, industrial commodities, cash, energy … did we mention cash?  Of course, due to our diversification discipline we’re not abandoning stocks, or bonds, but we have lightened up on both.  Within the stocks class, we’re emphasizing quality and value, as well as maintaining global diversification.  Systems sees some trouble for gold over the coming months, but we’re not abandoning it either.  Stocks could have a strong rally in the third quarter, but we’ll cross that bridge when we get to it.  For now we’re mostly holding more than our usual allocation of cash.