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Today may feel different, but it isn’t. The past 13 months’ trading action in the U.S. is the second example of this phenomenon in the current (2009-to-date) cyclical bull market. We focus on 11 previous episodes for perspective. Plus we clarify recent thoughts on interest rates and stock market valuations.

In Q2, the Low P/E Tier was the best performing subset, up 5.8%. In 2012, the Middle Tier led with a gain of 19.7%, versus +16.2% for the High Tier and +12.2% for the Low Tier.

Was the brief taper-induced pullback a sign of what’s to come down the road?  If so, we looked at what factors performed well and what factors didn’t in response to the rising rate environment.

Although the fundamental picture remains healthy for most U.S. High Yield issuers and defaults are expected to be low, the reversal of a crowded trade could lead to further substantial losses on these bonds.

We believe the sell-off in Munis is overdone in the short-term and these bonds look attractive relative to Treasuries. But in the medium-term the tapering risk will linger; this is a big negative for long maturity credits like Munis.

The longer term demand for safe spreads is likely to remain strong once yields normalize and volatility recedes.

The RAI rose again in June and stays on a “High Risk” signal. June saw an acute case of carry trade reversal; we remain cautious and recommend higher quality within fixed income.

For the first half of the year, QE tapering disrupted the usual patterns for most interest rate related markets but equities are largely on track. In the second half, the common message seems to be higher volatility and lower returns.

We think 3% is the upper bound in the short term. However, we believe it will settle back closer to 250 bps by the end of the year.

Core, Global, and Asset Allocation Portfolio overviews.

Sequential growth rates are all down this earnings season, but Large Caps are weathering the storm better than their Small Cap counterparts.

Q1 relative to Q4 growth rates deteriorated across all capitalization tiers indicating a broad based top-line slowdown. Mega Caps have shown the lowest rate of revenue growth at –0.9%.

Most noteworthy this week was a combined estimated $13.5 billion exiting bond mutual funds and ETFs on a net basis.

Commodity producers seem to believe that last decade’s commodity boom is set to repeat. This belief itself probably ensures that it won’t.

We’ve frequently mentioned the two-faced nature of thematic leadership during the current bull market. Filtering out the minor swings, Phase One lasted from March 2009 through February 2011 and was dominated by low quality, high beta and cyclical stocks.

The new debate over the QE “taper” erupted at the same time that a long-reliable Fed-tracking tool is telling us it’s time to ease.

The table below compares the status of today’s stock market “internals” versus those which existed at the onset of (1) the past four U.S. bear markets; and (2) the two severe corrections taking place within the current bull market. There’s good and bad news here.

We’ve written before about retail investors’ tendency to “conflate” stock market action with movements in the underlying economy. Misunderstanding this interrelationship generally causes the public to liquidate stocks when the economy is weak, only to ultimately buy them back when the economic recovery is obvious to all.

Notwithstanding the opening days of June, U.S. stocks have shown remarkable strength considering the bull is now well into its fifth year.