Stocks End Q2 With A Bang
After the previous week’s post-Brexit selloff, stocks closed out last week with one of the best performances of 2016 as investors bought the dip. In the first half of the year, the S&P 500 was up 2.69%, the Dow was up 2.90%, the NASDAQ was down 3.29%, and the MSCI EAFE was down 6.28%. All these numbers are as of the quarter’s end on June 30.[ii]
Several possible roadmaps for the Brexit have been released over the past week by various political factions, but no official plans exist yet.[iv] We can expect these negotiations to dominate European headlines for months to come.
What does the data say about the U.S. economy?Running Sneakers Store | Air Jordan XXX1 31 Colors, Release Dates, Photos , Gov
The focus on international events has overshadowed some positive indicators here in the U.S. The final estimate of Q1 Gross Domestic Product (GDP) growth shows that the economy grew 1.1% in the first three months of the year. This final estimate is up considerably from the 0.5% growth originally reported in the first estimate.[vi]
While we don’t yet have official data on Q2 GDP growth, two advanced forecasts by the Federal Reserve show 2.6% and 2.1% growth, respectively, indicating the economy accelerated after the first quarter.[viii] Much of the weakness can be attributed to persistent headwinds from low energy prices and a strong dollar. Despite the lackluster growth expectations, we’re hoping to see some positive surprises and standout performances. We’ll know more in a few weeks.
What will the next few weeks bring?
Volatility is likely. Though markets have shrugged off the Brexit panic, Europe isn’t in the rearview mirror yet, and we should be prepared for more hiccups down the road. While the summer is often a sleepy time for markets as traders take their own holidays, recent events make it likely that markets will remain fickle. When trading volume is low, even minor events can have an outsized effect on market performance.
Next week, investors will take stock of last quarter and wait for new data. Friday’s release of the June jobs report will be carefully analyzed to see whether May’s meager job gains were an anomaly or the beginning of a worrisome labor market trend. Minutes from the last Fed Open Market Committee meeting will hopefully provide some clarity about the Fed’s future interest rate decisions.
We’re still closely monitoring markets and reviewing economic data as it emerges. We’ll continue to update you as needed.
Monday: Markets closed for Independence Day Holiday
Tuesday: Factory Orders
Wednesday: International Trade, ISM Non-Manufacturing Index, FOMC Minutes
Thursday: ADP Employment Report, Jobless Claims, EIA Petroleum Status Report
Friday: Employment Situation
|Data as of 7/1/2016||1-Week||Since 1/1/16||1-Year||5-Year||10-Year|
|Standard & Poor's 500||3.22%||2.89%||1.23%||11.40%||6.56%|
|U.S. Corporate Bond Index||1.09%||7.68%||8.48%||6.04%||8.03%|
|Data as of 7/1/2016||1 mo.||6 mo.||1 yr.||5 yr.||10 yr.|
|Treasury Yields (CMT)||0.24%||0.37%||0.45%||1.00%||1.46%|
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Motor vehicle sales stay strong. Americans continued to buy cars and trucks in June despite the market volatility. Purchases of big-ticket items are a good sign for consumer spending last quarter.[x]
Construction spending falls. Spending on construction projects fell by 0.8% in May, dropping for the second-straight month. The fall was led by a significant cutback in spending on public construction projects.[xii]
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