How things change so quickly, or do we simply choose to forget? In either case the 2nd quarter of 2012 was almost a mirror opposite of the first quarter of 2012. High volatility, a sharply negative performance quarter, European debt headlines, and slowing domestic data all returned with vengeance during the quarter.

So, with the second half of 2012 right in front of us where do we go from here? The bulls say that seasonality and an election year take precedence and after a summer correction, the market will rally into the election and year end. The bears say that the Euro sovereign debt crisis and the domestic fiscal cliff/tax uncertainty will deter consumer confidence/spending. The result of this will be a very short term summer rally, followed by a downward move into the election and then further downside into year end.

Amidst all these different predictions it is important to remember that the two most important factors that control the stock market are interest rates and earnings. The points of view of both the bulls and the bears continue on a daily basis. Despite all the points of view and market volatility the stock market will always settle at a reasonable ratio of stock price to company earnings.

At current levels and with low interest rates the market is far from over valued – that’s the good news. The bad news is I do not expect the volatility to go away until the international/domestic fiscal and debt issues are addressed with more than interim solutions.