Q2 Market Update – It’s been a wild, wild quarter.
In early April, stock markets were doing so well (14 of 47 national benchmark indices hit all-time highs) that global market capitalization — the value of stocks trading on exchanges throughout the world — pushed past $70 trillion, according to Bloomberg Business. The publication attributed the climb to stimulus programs. About two-dozen countries’ central banks were either engaged in quantitative easing or had committed to lower interest rates.
Rate hike speculation
Since the start of the year, analysts have been avidly seeking clues about when the Federal Reserve may begin to tighten monetary policy. Would it happen in June? In September? In December? In 2016?
After a mid-June policy meeting, The Wall Street Journal reported that Fed officials expect to raise rates during 2015. However, the latest turn of events in Greece, turmoil in Chinese markets, a strong dollar (which could slow U.S. growth), and other factors may cause that signal to change.
China’s bull market ends
By late May, China’s Shanghai and Shenzhen Stock Exchanges were valued at about $10.3 trillion dollars. The Shanghai Composite Index was up about 60 percent from the start of the year, and the Shenzhen was up about 120 percent for the same period. Markets were pushed higher by enthusiastic Chinese investors. In April, the Financial Times described it like this:
“After years of poor performance, confidence in the stock market has returned in China with a vengeance. Savers have switched hundreds of billions of dollars out of property, deposits, and wealth management products in the hope of making a fast buck in stocks.”
Those hopes may have been dashed when Chinese markets headed south late in the quarter. During the last three weeks, Chinese markets have lost about $2.8 trillion in value, bringing the longest bull market in that nation’s history to a rather abrupt end.
Angst in the European Union
The European Central Bank’s 2015 quantitative easing (QE) program was a shot in the arm for Europe. Expectations that QE would spur economic growth and help the region conquer deflation helped push some stock markets to all-time highs.
Late in second quarter, however, the high gloss of QE was dulled by Greek gamesmanship. After a stellar first quarter, the Stoxx 600 Index, which includes stocks of companies in 18 European countries, saw its first-half gains fall to 11 percent, according to Bloomberg Business.
Crowdfunding for Greece?
You may be familiar with crowd funding. If not, boiled down, it comes to this: Someone has an idea, sets up an online campaign, and raises money to fund the concept. Often perks are offered for contributions.
Late in the second quarter, a 29-year-old shoe salesman in York, England, set up the Greek Bailout Fund. He wrote, “All this dithering over Greece is getting boring…The European Union (EU) is home to 503 million people, if we all just chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon. Easy.”
You’ve got to admire his audacity. The goal? Raise €1.6 billion. As of July 5, 2015, €1.8 million had been pledged.
A no vote in Greece
We may be in for more excitement during third quarter, which began with the Greek voters rejecting the EU’s bailout offer.
Data as of 7/2/15 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Standard & Poor’s 500 (Domestic Stocks) |
-1.2% |
0.9% |
4.6% |
14.8% |
15.1% |
5.6% |
| Dow Jones Global ex-U.S. |
-1.8 |
3.7 |
-7.3 |
7.0 |
5.2 |
3.3 |
| 10-year Treasury Note (Yield Only) |
2.4 |
NA |
2.7 |
1.6 |
3.0 |
4.1 |
| Gold (per ounce) |
-0.2 |
-2.6 |
-11.4 |
-10.3 |
-0.7 |
10.6 |
| Bloomberg Commodity Index |
1.3 |
-3.1 |
-25.8 |
-8.3 |
-4.6 |
-4.4 |
| DJ Equity All REIT Total Return Index |
0.2 |
-4.0 |
5.9 |
8.9 |
15.0 |
7.0 |
S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in this index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* “Grexit”
Sources:
[3] http://money.cnn.com/2015/06/15/investing/china-stocks-10-trillion/
[4] http://www.ft.com/intl/cms/s/0/6a83b534-df30-11e4-852b-00144feab7de.html#axzz3evxFdJq7
[8] https://www.indiegogo.com/greek-bailout-fund.html
[9] http://www.bbc.com/news/world-europe-33403665
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