The economy. The bond market. The stock market

Transcription

1 The economy Global headlines trump steady U.S. economy The U.S. economy continues to plod its way forward at a slow and steady pace. Short-term setbacks seem to be the norm, but a general sense of an improving economy is seen through many sectors. Consumer confidence has rallied as wages slowly increase and the unemployment rate drops, but labor force participation is weak, and GDP was confirmed negative for the first quarter. The focus on month-to-month indicators has been de-emphasized recently by the scale of global headlines that seems to be driving markets and investor sentiment. Having a steady economic backdrop is very helpful during a period of global challenges. The stock market Greece rattles markets with late June sell-off Equities were hard-pressed to hold gains during June as U.S. stock markets sold off to close out the quarter. With debt payments missed and bailout talks at a standstill, Greece entered the U.S. s Fourth of July holiday weekend with its eyes on a referendum vote, where Greek citizens ultimately voted against creditors conditions for further bailout aid. Many people believe this vote was a direct signal that Greece will be leaving the Euro. Markets seem to be taking the news in stride, as many investors expected this would happen. However, with Greek banks closed and questionable confidence in Europe, the longer-term uncertainty of any global effects is worrisome. We believe the U.S. is largely secluded from any direct effects from this situation, but it does bode well for a diversified approach and actively-managed international managers to take advantage of opportunities that may arise. Data as of June 30, 2015 Source: The Wall Street Journal, US Department of Treasury The bond market Connect with us: Laura Barry Kelly Baumbach Brion Collins Robert Cron Jay Czarapata Jay Frank Justin Goldstein Buddy Horner Kevin Kosgard Bruce Laning Bonds negative in Q2 as Fed mulls decision Interest rates rose during the second quarter, leaving U.S. Government bonds with their worst loss since The yield on the 10-year Treasury rose over 0.5 during the second quarter, before closing June at 2.35% as caution over Greece pushed yields back down. Along with Greece, Puerto Rico has also garnered investors attention as they, too, are dealing with debt issues. Short-term fixes have cooled any immediate concerns, but the U.S. commonwealth s $72 billion debt load is unpayable, according to the Puerto Rican Government. Attractive for their federal, state, and local tax exemptions, Puerto Rican bonds have found their way into U.S. investor portfolios and mutual funds. While not an overwhelmingly large part of any of the money manager portfolios that we use with clients, the drop in Puerto Rican bond prices has and will continue to have a small impact on performance. On a positive note, Standard & Poors upgraded the state of California s debt to AA-, a sign that some state finances are improving. Marc McDowell Kevin Moloney Heath Moore Brooke Napiwocki Curt Parish Corey Purkat John Richards Tiffany Rovaina Jason Schmudlach Indexes YTD Treasury yields Stock indexes Prime rate 3.25% 6-month 0.11% Dow Jones 17, % LIBOR rate (3 mos.) 0.28% 1-year 0.28% S&P 500 2, % Unemployment rate 5.3% 2-year 0.64% NASDAQ 4, year mortgage rate 3.37% 5-year 1.63% Bond indexes 30-year mortgage rate 4.19% 10-year 2.35% Broad Market Barclays Agg -0.1 CPI (12-mo. ending 5/31/2015) year 3.11% US Corporate Barclays Capital -0.78% GDP (first quarter 2015) -0.2% US Government Barclays 0.08% Oil price (price/barrel) $59.47 Mortgage-Backed Barclays 0.17% Gold (oz.) $1,172 Bronfman E.L. Rothschild, LP is a registered investment advisor. Securities, when offered, are offered through Baker Tilly Capital, LLC, member of FINRA and SIPC; Office of Supervisory Jurisdiction located at 10 Terrace Court, Madison, WI 53718, phone Bronfman E.L. Rothschild, LP and Baker Tilly Capital, LLC are not affiliated. This publication should not be viewed as a recommendation, an offer to sell, or a solicitation of an offer to buy a particular security or service. The commentary provided is for informational purposes only and should not be relied on for accounting, legal, tax, or investment advice. Financial information is from third-party sources. While such information is believed to be reliable, it is not verified or guaranteed. Performance of any indexes is provided for reference and competitive purposes only without factoring any fees, commissions, and other charges. Individual results achieved by investors will be different from those of the indexes. Indexes are unmanaged; one cannot invest directly into an index. The views and opinions expressed are those of Bronfman E.L. Rothschild, LP, and they are subject to change at any time. Past performance does not imply or guarantee future results. Investing in securities involves risks, including possible loss of principal. Diversification cannot assure a profit or guarantee against a loss. Investing involves other forms of risk that are not described here. For that reason, you should contact an investment professional before acting on any information in this publication Bronfman E.L. Rothschild, LP

2 Economic trends Leading Indicator Consumer confidence 3 Month Trend Our Outlook The consumer confidence index rose in June to a reading of 101.4, up from 94.6 in May. The increase was supported by strong job growth reports. (1985=100, The Conference Board) University of Michigan/Reuters consumer-sentiment index rose in June to a reading of (Reuters) Retail sales were up 1.2% in May from a month ago. (Commerce Department) Consumer spending increased by 0.9% in May from a month ago, while personal incomes rose 0.5%. (Commerce Department) The savings rate fell in May from 5.6% to 5.1%. (Commerce Department) The household debt service ratio (debt to disposable income) was at 9.92% as of Q1 2015, down from a high of 13% in (Federal Reserve) Spending Neutral Manufacturing June reading increased to 53.5, the second consecutive monthly increase after falling every month since November (Institute of Supply Management) Inventories of manufactured durable goods fell by 0.2% in May, the first drop in the past 23 months. (US Census Bureau) GDP growth In the Commerce Department s third and final estimate, first quarter GDP fell by an annualized 0.2%. This revision was an increase from the -0.7% previous estimate, with exports decreasing less than expected. (Commerce Department) Lagging Inflation Housing Neutral CPI increased by 0.4% in May from a month earlier and 12 month CPI was flat at 0.. The gasoline index was up 10.4% in the month. (BLS) Core CPI (CPI food & energy) increased in May by 0.1% from a month prior and the annual rate fell slightly to 1.7%. (BLS) The 20 city Case-Shiller Index (home-price readings) was higher in April by 1.1% from a month ago, and the index was up 4.6% over the past 12 months. (S&P) Existing home sales rose by 5.1% in May from a month earlier. (NAR) New home sales rose by 2.2% in May from a month earlier. (NAR) Job growth U.S. payrolls increased by 223,000 in June and the unemployment rate declined to 5.3%. However prior months revisions were down from the original reports and the labor force participation rate fell. (Bureau of Labor Statistics

3 Headlines Greece, Puerto Rico make headlines as Q2 comes to a close. Source: European Central Bank Source: Commerce Department, Govt Bank for Puerto Rico, Thomson Reuters Municipal Market

4 Equity markets Equity market performance 1 5.5% 4.8% 5% 2.4% 1.2% 3.1% 1.7% 0.8% -5% % -2.1% S&P % -2.8% Russell Mid Cap Russell 2000 MSCI EAFE June '15 YTD MSCI Emerging Markets -1.5% -1.1% -1.6% -4.4% Gold (GLD) Broad Commodities -5.8% REITS Sector performance 0.5% Materials -3.9% 6.8% Consumer Disc 0.6% -0.4% Financials -0.3% -4.7% Energy -3.4% -3.1% Industrials -2.5% Technology 3.2% Telecom -2.3% -0.8% Consumer Staples -1.8% Source: People s Bank of China, FactSet 9.6% Health Care Utilities 0.8% -4.3% -0.3% -10.7% YTD 1 2 China cuts interests rates, loosens reserve requirements in order to spur growth. The Shanghai Composite Index dropped 16% in June, but is still positive on the year. June '15 Small cap stocks lead the way with greater focus on U.S. market.

5 Fixed income markets Bond market performance Year Treasury Note 5% % % 0.1% 0.1% 0.3% -0.1% % -1.7% -1.5% % US Government (5.1 yrs)* Munis (8.5 yrs) TIPS (7.6 yrs) Corporate Bonds (6.6 yrs) High Yield (4.3 yrs) 1.50 Jan. 1, 2015 June 30, 2015 Source: U.S. Department of Treasury June '15 YTD *Index Duration Source: Federal Reserve, Barclays, JP Morgan Asset Managment Bronfman E.L. Rothschild, LP is a registered investment advisor. Securities, when offered, are offered through Baker Tilly Capital, LLC, member of FINRA and SIPC; Office of Supervisory Jurisdiction located at 10 Terrace Court, Madison, WI 53718, phone Bronfman E.L. Rothschild, LP and Baker Tilly Capital, LLC are not affiliated. This publication should not be viewed as a recommendation, an offer to sell, or a solicitation of an offer to buy a particular security or service. The commentary provided is for informational purposes only and should not be relied on for accounting, legal, tax, or investment advice. Financial information is from third-party sources. While such information is believed to be reliable, it is not verified or guaranteed. Performance of any indexes is provided for reference and competitive purposes only without factoring any fees, commissions, and other charges. Individual results achieved by investors will be different from those of the indexes. Indexes are unmanaged; one cannot invest directly into an index. The views and opinions expressed are those of Bronfman E.L. Rothschild, LP, and they are subject to change at any time. Past performance does not imply or guarantee future results. Investing in securities involves risks, including possible loss of principal. Diversification cannot assure a profit or guarantee against a loss. Investing involves other forms of risk that are not described here. For that reason, you should contact an investment professional before acting on any information in this publication Bronfman E.L. Rothschild, LP