We prepare ourselves for the unexpected, but 2011 proved to be a surprising and eventful year. The financial markets started the year strongly with bullish optimism, but the mood shifted as European sovereign debt problems and the S&P downgrade of America’s credit rating stifled investor confidence. As a result, the S&P 500 experienced a meaningful -21% correction from the April highs to the October lows. Fortunately, the year finished with a strong rally and the index produced a total return of +2.1%. In this environment, the most conservative investment sectors performed the best – American stocks outperformed major foreign markets, Treasuries did better than other bond categories and growth stocks beat cyclical stocks. Some unusual events occurred during the year, such as, the devastating Japanese earthquake and tsunami, the Arab Spring uprisings and the demise of Osama Bin Laden, Moammar Gaddafi and Kim Jong Il. Positively, earnings grew more than expected with S&P 500 operating earnings increasing +17% compared to initial expectations of +13%. However, confidence eroded more than fundamentals and valuations compressed during the year. Today, we believe the long-term outlook for equities offers above-average appreciation potential based upon a combination of solid earnings growth, low inflation and rising multiples. There are risks, but we view any meaningful correction as an opportunity to selectively add to equities.