Quarterly Vantage PointSubmitted by Guidant Planning on July 5th, 2016
|Market Indices1||June||2Q 2016||Year-to-Date|
|MSCI Emerging Markets||4.00%||0.66%||6.41%|
|Barclays U.S. Aggregate Bond||1.80%||2.21%||5.31%|
|Barclays U.S. Municipal Bond||1.59%||2.61%||4.33%|
|Barclays U.S. Corporate High Yield||0.92%||5.52%||9.06%|
|1Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest|
- The S&P 500 Index rebounded to finish the second quarter within 1.5% of its all-time high.
- Energy producers led the quarterly advance, rising over 11%, as crude oil had its best quarter since 2009.From its early April low of $38.59/bbl., U.S. oil futures surged nearly 26% during the quarter.
- Commodities were the best performing asset class during the quarter, with the Bloomberg Commodity Index surging 12.78%.
Despite a global sell off sparked by Britain’s unprecedented “Brexit” vote to leave the European Union, U.S. equity markets rebounded to end the second quarter in positive territory. The American advance echoed a strong three-day U.K. rally that sent the FTSE 100 Index higher than it was before the referendum. For the U.S., Britain’s June 23rd decision to unwind its EU membership ignited a 5.3% S&P 500 selloff, its largest two-day retreat in 10 months. Yet backed by timely central bank posturing for continued low rates and pledges to increase stimulus, the S&P 500 finished the quarter with its biggest three-day rally since February and capped its third consecutive quarterly advance. On the last day of the quarter, European Central Bank officials said they are mulling a decision to relax rules for its monthly bond purchase program and Bank of England Governor Mark Carney said the central bank is poised to cut its key lending rate this summer and hinted at boosting stimulus, if needed. After the Brexit vote, a Federal Reserve rate hike appears unlikely this year and doubtful for much of 2017.
Although small-cap U.S. companies outperformed both large-and mid-cap stocks in the second quarter, they trailed in June and for the year. The Russell 2000 Index, a broad measure of small-cap equity performance, rose 3.79% last quarter, while falling 0.06% last month and up 2.22% on a year-to-date (YTD) basis. Mid-cap stocks performed best this year, with the Russell Mid Cap Index up 5.50% YTD and gained 0.46% in June.
Value-oriented stocks outperformed growth stocks during the month, quarter and YTD. The Russell 1000 Value Index rose 0.86% in June, gained 4.58% during the quarter and has returned 6.30% YTD. The Russell 1000 Growth Index declined 0.39% last month, gained 0.61% in the second quarter and is up just 1.36% YTD.
Within the S&P 500, eight of the ten major sector groups posted second quarter gains, led by Energy (+11.62%), Telecom (+7.06%), and Utilities (+6.79%). Technology (-2.84% and Consumer Discretionary (-0.91%) lagged. On a YTD basis, eight of the ten sectors advanced, with Telecom (+24.85%) and Utilities (+23.41%) the best performers, while Financials (-3.05%) and Technology (-0.32%) have declined.
The MSCI EAFE Index, measuring returns on developed markets outside the U.S. and Canada, under performed domestic equities in all three time periods. The MSCI EAFE fell 3.36% last month, lost 1.46% in the second quarter and is down 4.42% YTD. Helped by continued low U.S. interest rates, the MSCI Emerging Markets Index rebounded 4% in June, leading to a quarterly gain of 0.66% and extending its YTD gain to 6.41%.
With negative government debt yields in Germany, Switzerland and Japan, global investor appetites for U.S. credit have risen sharply. U.S. Treasuries, as measured by the Barclays U.S. Government Bond Index, gained 2.14% last month and returned 5.22% in the first half of 2016 for its best two consecutive quarters since 2011. Benchmark 10-year Treasury notes have rallied in price over the past six months, pulling its yield down 31 basis points in the second quarter and 50 basis points during the first quarter, ending the first half of this year at 1.471%. Investment grade bonds, of all types, as measured by the Barclays U.S. Aggregate Bond Index, gained 1.80% in June, widening its second quarter gain to 2.21%.
Higher rated corporate bonds outperformed Treasuries, with the Barclays U.S. Corporate Investment Grade Bond Index gaining 3.57% in the second quarter and returned 7.68% on a year-to-date basis. At the other end of the credit spectrum, the Barclays U.S. Corporate High Yield Index, which measures returns of below-investment grade corporate bonds, gained 0.92% in June, capping the second quarter with a 5.52% return. High yield bonds have surged 9.06% YTD, the best two quarter performance in seven years. The Barclays Municipal Bond Index rose 1.59% last month, extending its second quarter and YTD returns to 2.61% and 4.33%, respectively.
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Forefield, Inc. Copyright 2016
Forefield, Inc. Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016
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 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. You cannot invest directly in an index.
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