Market Digest \u2013 Week Ending 5\/17\r\n\r\nThe bull marches on. The S&P 500 posted its fourth straight weekly gain and has returned over 17% so far in 2013. International stocks again failed to keep pace and the Eurozone economy again slowed more than expected. Treasuries fell despite a tame inflation report and soft industrial production numbers. Gold\u2019s downward trend accelerated, driven in part by a rising dollar and falling confidence among investors that the metal can recover.\r\n\r\nWeekly Returns:\r\nS&P 500: 1,666 (+2.0%)\r\nMSCI ACWI ex-US: (+0.3%)\r\nUS 10 Year Treasury Yield: 1.95% (+0.06%)\r\nGold: $1,357 (-6.3%)\r\nUSD\/EUR: $1.283 (-1.2%)\r\n\r\nMajor Events:\r\n\r\n \tMonday \u2013 Petrobras issued $11 billion in new debt, the most ever in a single sale by an emerging markets corporation.\r\n \tTuesday \u2013 The FBI opened a criminal probe against the IRS for targeting conservative groups.\r\n \tTuesday \u2013 The Congressional Budget Office said the federal deficit is expected to shrink to $642 billion, sharply lower than last year's $1.09 trillion shortfall.\r\n \tWednesday \u2013 Eurozone Q1 GDP shrank 0.9%, worse than expected. It marked the sixth consecutive decline and the longest recession in the region since WW2.\r\n \tThursday \u2013 US inflation (CPI) decreased by 0.4% in April. The core measure excluding food and energy rose just 0.1%.\r\n \tThursday \u2013 Technology equipment giant Cisco reported better than expected earnings and provided a positive outlook.\r\n \tThursday \u2013 Bill Gates regained the title of world\u2019s richest person, according to Bloomberg. He passed Carlos Slim and has a fortune of $72.7 billion.\r\n \tFriday \u2013 The index of US leading indicators rose 0.6%, ahead of most expectations.\r\n \tFriday \u2013 The University of Michigan consumer sentiment index rose to 83.7, ahead of expectations and the highest level since 2007.\r\n\r\nOur Take:\r\nUS stocks once again outpaced all other major asset classes. Treasuries, Emerging Market stocks and Gold were negative this week. From an objective diversification view, the goal is to own assets that behave differently. From an emotional standpoint, owning anything other than US stocks has been a bummer lately.\r\n\r\nWhenever one asset class outperforms for a long time it starts to seem \u201cobvious\u201d it is somehow \u201cbetter\u201d. Eventually, many investors gravitate toward it, often creating a short term self-fulfilling prophecy. But after a time, the party will end. A previously shunned asset class will surprise everyone with strong performance, and most investors will have hurt themselves trying to time allocation decisions.\r\n\r\nIf you are a long term US based investor, US stocks should probably be the largest single asset class in your portfolio. But don\u2019t abandon good diversification principles. Eventually international stocks will regain leadership. Trying to get cute with the timing is usually counter-productive.\r\n\r\nEurope is in bad shape, but it will eventually recover. China has serious problems in its credit markets, but it is now a massive economy and it isn\u2019t going away. Asset class leadership is always shifting and will continue to do so. This is a good thing. If you own a good long term portfolio and rebalance periodically, the benefits of diversification will help you dramatically over time \u2013 especially if you are still saving and can deploy new capital to depressed asset classes at lower prices.