Summer is here along with family vacations, Fourth of July celebrations and high expectations for the Cubs and White Sox. This is a time to relax and enjoy, and typically that means a summer doldrums in the markets, called “sell in May and go away”. We also have a presidential election year and a Federal Reserve bent on raising interest rates, so there are external risks that could impact markets. We’ll take a look at last quarter and our current state:
Summary, Last Qtr: Last quarter saw a rebound in the equity markets after a market correction in at the beginning of the year. The rally was lead mainly by dividend paying stocks, illustrating that investors are looking for quality and yield and in some cases, may be taking on more risk than they normally would if bonds paid yields more around historical rates. Oil prices have rebounded, however stability isn’t quite there yet, causing a bit of uncertainty in that sector. The Federal Reserve has been watching economic data as it comes in and assessing the economy with hopes of raising interest rates. The last raise was in December, and the markets promptly sold off heavily after that.
Our Commentary: Uncertainty is high but we are starting to see some clouds clearing. The Federal Reserve wants to raise interest rates in order to have some room to lower rates in the future, if they need too. Europe is flirting with negative interest rates and Japan has implemented negative interest rates. This is an odd phenomenon for the bond and currency markets and we don’t yet know the full impact of Japan’s negative interest rate experiment. For the stock markets, international stocks have been volatile and mainly negative while the U.S. stock market has been volatile and is slightly positive for the year. We think stock market volatility will continue through the year as speculation about the Federal Reserve raising interest rates along with the possibility of re-introducing quantitative easing grows, plus a circus-like U.S. Presidential Election gets under way. We still favor the U.S. markets, both bond and stock, over all other countries at this point and we expect “active” management to be of more use than “passive” management in this environment.
Our Investment Committee periodically monitors the markets and will continue to provide comments at the beginning of each quarter. Each portfolio is different and we recommend getting individual help, which we are happy to provide.
Fixed income securities carry interest rate risk. Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties.
Opinions voiced are not intended to provide specific advice and should not be construed as recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial professional.
Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index. Past performance is not a guarantee of future results.
International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods. Past performance cannot guarantee future results.