July 14, 2015
Dear Friends, Attached is our review of the financial markets through the second quarter. Amidst increased volatility, markets were relatively flat for the quarter. During 2015, domestic stocks have been outperformed by foreign stocks, especially Europe, for the first time in several years. Despite troubles in Greece, China and Puerto Rico, we remain cautiously optimistic on stocks vs. other asset classes for the near term. Although valuations are higher than historical averages, we see no tangible sign of an imminent slowdown or recession in the U.S. economy. Having said that, we see risk and volatility increasing in the coming months as we work through various foreign issues and almost surely rising interest rates. Let us know if we can give you additional thoughts. We hope you had a happy Fourth of July! Matt and Andrew
Key Dates/Data Releases
7/1: ISM manufacturing report
7/2: U.S. factory orders, employment situation, jobless claims
7/6: ISM non-manufacturing index
7/7: International trade, JOLTS report
7/8: Federal Open Market Committee minutes
7/9: Jobless claims
7/13: Treasury budget
7/14: Retail sales, import and export prices
7/15: Producer Price Index, industrial production
7/16: Jobless claims
7/17: Consumer Price Index, housing starts
7/22: Existing home sales
7/23: Jobless claims
7/24: New home sales
7/27: Durable goods orders
7/28: Consumer confidence
7/29: Federal Open Market Committee announcement, home sales
7/30: GDP, jobless claims
Quarterly Market Review: April-June 2015
As winter weather finally lost its chokehold on the U.S. economy, investors grew increasingly comfortable with the Federal Reserve's slow-and-steady approach to determine when to raise short-term interest rates. Historic highs were reached by the large-cap Dow (18351) and S&P 500 (2134); the small-cap Nasdaq (5164) and Russell 2000 (1296) also reached all-time highs during the second quarter. Unfortunately, those gains were all but wiped out as the financial crisis in Greece affected markets domestically and around the world. Both the Dow and S&P 500 lost 0.88 percentage points and 0.23 percentage points respectively compared to the end of the first quarter. The Nasdaq and Russell 2000 still finished ahead of last quarter, but not by much.
U.S. Treasury prices declined from the first quarter, with corresponding yields making their biggest gains since 2013. The decrease in bond prices was largely attributable to increased consumer spending coupled with investor confidence in the equity markets, which encouraged more money shifting from bonds to equities. Lower unemployment rates along with a slowly improving economy are additional factors leading to lower prices/higher yields.
Oil prices grew to $59 a barrel during the quarter, pushing gas prices higher. Gold, meanwhile, also felt the effects of the global economy, finishing the quarter down at roughly $1,172 an ounce.
As of June 30
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
China, which has been experiencing favorable market returns for several years, saw its stocks sink the most in five years after reports from several high profile analysts among other analysts warned that valuations had climbed too far, according to Bloomberg. In response to the selloff in Chinese stocks, the People's Bank of China (the country's central bank) cut both its benchmark interest rates and the amount of reserves certain banks are required to hold. All this as the country continues efforts to promote an economy driven by private business and consumer spending rather than infrastructure (government-sponsored) outlays and exports.
Puerto Rico, with its economy ailing, has indicated that it cannot pay its debts. Puerto Rican bond holders are looking at significant losses, as the central government may run out of cash within a month, according to the Wall Street Journal.However, at the time of this writing, Puerto Rico was close to a deal with its creditors to avoid default.
All eyes will continue to focus on the financial crisis in Greece. Will the initial negative impact on the markets in response to Greece's shuttered banks, repayment default, and the prospect of the country's exit from the eurozone continue to drive markets further into negative territory? Will the Federal Reserve provide more information on the timing of the anticipated interest rate hike? Will the dollar increase in strength, further softening domestic exports?
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.
Refer a friend
To find out more click here
Securities and Investment Advisory Services may be offered through NFP Advisor Services, LLC, (NFPAS), member FINRA/SIPC. NFPAS may or may not be affiliated with the firm branded on this material.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2015.
To opt-out of future emails, please click here.