After a very quiet summer week on Wall Street (half the traders must have been o n vacation), markets

closed up, consolidating the gains made since the June 4th low. Last week the S&P gained 1.07%, the Dow picked up 0.85%, and the Nasdaq gai ned 1.78%. Before getting into what transpired last week, lets take a moment to r eflect on how far weve come this year. The S&P has been positive eight weeks out of the last ten, has gained 11.79% for the year, and is up 25.44% since this tim e in 2011.[1]Despite a rocky second quarter and concerns about a double-dip rece ssion, the markets are actually performing well. We know it can be hard to maint ain composure when markets hit turbulence, but overall equity performance is get ting better.[2] Federal Reserve Chairman Ben Bernanke started off Monday with reassurances that broad market measures are still pointing towards a recovery.[3] While he didnt di scuss monetary policy, we can be sure he recognizes that the economy isnt out of the woods yet and is still prepared to take action if needed. Though the week wa s light on economic news, jobless claims turned up lower than expected and our t rade deficit narrowed, indicating that the economy is doing better, overall.[4] Markets ticked up after his remarks, continuing their quiet rally. Analysts have been surprised by the stealthy summer rally, as corporate revenues are down and economic fundamentals are still lukewarm. One explanation for why stocks are moving higher despite weak market internals is that traders expect Fe d action next month. The downside to this is that if the Fed disappoints, equiti es could tumble. As we get closer to the end of the year, we can also expect add itional media focus on the impending fiscal cliff, the expiration of tax cuts, a nd deep government spending cutbacks due to kick in January 1st; if the federal government doesnt develop a plan, it could definitely rein in any market gains fo r the year. In short, lets remain cautious about our summer sugar high rally, and understand th at there will likely be additional turbulence ahead as election season heats up, the Fed announces its policy plans, and investors turn to our leaders for decis ive action.