We're still underperforming for the year, with too much interest rate exposure and too little stock exposure, but for the month we were basically in line with the benchmark Vanguard total portfolio fund while still taking less risk in both our portfolios.

The market was rolling along just fine in May with the volatility from earlier in the year seemingly easing and good economic data slowly pushing up stocks and interest rates (and inflation). Then, at the end of the month, Italy returned as a potentially destabilizing force to foreign investing, sending Italian stocks (which we own directly through iShares MSCI Italy Capped (EWI)) down sharply and taking the euro and most other foreign markets down with it.

The relatively tame overall decline of 2.56% in the S&P 500 in March belies the extreme swings that have occurred in the market lately. In the last two months we've seen a fairly quick 10% drop followed by a very quick recovery and then another collapse just recently. Hot tech stocks actually moved to new highs in the bounce back.

Too much of a good thing is the main worry right now. We cut taxes into an already heating up economy which will lead to more inflation which will cause the federal reserve to raise rates higher than they would with no tax cuts. This means higher mortgage and other financing rates — and if those go high enough we could be looking at another recession.