QUOTE OF THE
QUARTER
“A problem is a chance for you
to do your best.”
–Duke
Ellington
QUARTERLY TIP
Keeping federal tax returns,
W-2s, 1099s, year-end account statements, and sample pay stubs for 6-7 years is
sensible, in case you make an error in reporting income. The IRS wants you to
keep the past 3 years of federal tax returns just for proof of income,
deductions, and credits claimed.
|
A review of 2Q
2015
THE QUARTER IN BRIEF A 2.10% June retreat left the
S&P 500 down 0.23% for Q2 2015, putting an end to its 9-quarter winning streak.
The quarter’s biggest economic events occurred in late June – Greece defaulted on
its debt, the commonwealth of Puerto Rico said a default was imminent, and China’s
stock market plunged. The Federal Reserve seemed committed to raising interest
rates before the end of the year, even as it lowered its 2015 economic forecast.
Spring brought more home buying, higher oil prices, improved hiring, and a number
of encouraging signs that the economy was pulling out of a winter slump. Even with
all those positives, the headwinds in the stock market were too strong to allow a
broad advance.1,2
DOMESTIC ECONOMIC HEALTH The second quarter saw the Federal
Reserve revise its projections for 2015 GDP downward; the spring forecast of
2.3-2.7% growth was reduced to 1.8-2% growth. Its June 17 policy statement also
signaled at least one interest rate hike later this year – but perhaps only one, as
more Fed officials now believed the central bank should raise rates only once in
2015 with two calling for no move until 2016. It has long been thought that the Fed
might raise rates starting in September, but futures markets disagreed as the
quarter ended, envisioning the first move coming in
December.3
With revisions included, Labor
Department reports showed the economy adding 187,000 jobs in April, 254,000 jobs
in May, and 223,000 jobs in June. The unemployment rate fell to 5.3% in June, a
low unseen since April 2008; the U-6 rate measuring the unemployed and
underemployed declined to 10.5% in June, down half a percent from a year
earlier. Wages were up 2% in a year as of June.4
Two other key indicators showed
continued growth for America’s factory and services sectors. While the Institute
for Supply Management’s manufacturing PMI slipped to a 2-year low of 51.5 in
April, it rose to readings of 52.8 and 53.5 in May and June. The ISM service
sector PMI (which has averaged a robust 57.2 in the last 12 months) showed
readings of 57.8 for April, 55.7 for May and 56.0 for
June.5,6
Consumer confidence readings
were higher by the quarter’s end. The University of Michigan’s consumer
sentiment index posted final April, May, and June marks of 95.9, 90.7, and 96.1;
that June reading was the best since January. The Conference Board’s respected
survey jumped to 101.4 in June after coming in at 94.3 in April and 94.6 in
May.7,8
Consumer inflation remained but
a minor threat, even as the Consumer Price Index put up its largest monthly gain
since February 2013 in May. (The 0.4% May rise was largely due to a 10.4%
increase in retail gas prices.) Year-over-year, the headline CPI was flat while
the core CPI was up just 1.7%.9
Personal spending was up just
0.1% in April, then soared 0.9% for May. Retail sales experienced the same
“spring thaw,” advancing 0.2% in April and 1.2% in
May.10,11
Headline durable goods orders
sank 1.5% in April, then 1.8% in May; without volatile transportation orders,
there was an 0.3% April loss and an 0.5% May gain. Producer prices jumped 0.5%
in May after a 0.4% dip for April.10,12
As Q2 went on, the Bureau of
Economic Analysis improved what was a dismal Q1 GDP reading. In the second BEA
Q1 GDP estimate, the economy contracted 0.7%; in its third and final estimate,
the contraction was 0.2%.10
Finally, Puerto Rico Governor
Alejandro García Padilla told the world on June 28 that the commonwealth could
not pay its $72 billion in public debt, shocking many investors but not many
economists. Padilla’s administration is exploring a Chapter 9 bankruptcy as an
option, but under current federal law that option is only available to U.S.
cities, not territories.13
GLOBAL ECONOMIC HEALTH As early as April, there were
indications that Greece might default on its debt. Then it missed a June 30
deadline on a €1.5 billion debt repayment, triggering a global stock selloff as
investors glimpsed a crack in the framework of the European Union. The quarter
ended with Prime Minister Alexis Tsipras and the ruling Syriza party announcing a
July 5 national vote on whether Greece should accept further austerity measures as
a condition of additional financial aid; 61% of the electorate voted no, opening
the door to Greece’s exit from the EU and leaving EU leaders with a hard choice for
July – either play hardball with Greece and risk a humanitarian crisis, or play
softball with Greece and placate its people in a last-ditch effort to keep it in
the eurozone. On July 6, the Guardian
reported that the Greek banking system held only about €500 million, or about €45
per person. This was the last development the eurozone needed as it tried to mount
an economic recovery from its recent recession.14,15
The Greek debt crisis did not
wholly distract investors from troubles in China – namely, the panic in its
stock market. The Shanghai Composite fell 24% between June 12 and July 4 (prior
to that, it was up 149% YTD). More than $2.4 trillion in wealth evaporated in
this sudden bear market. China’s major brokerages actually formed a $19.4
billion rescue fund to buy up shares in major companies listed in the index,
while the Chinese government encouraged its citizens to purchase stock. China’s
annualized growth slowed to 7.0% in Q1, its poorest GDP reading since 2009; on
June 29, the People’s Bank of China made its fourth interest rate cut in eight
months.16,17
WORLD MARKETS While many European indices
suffered heavy Q2 losses, the picture was a bit brighter in other parts of the
world. The damage in Europe was certainly severe: the CAC 40 sank 4.84%, the FTSE
MIB 3.01%, the DAX 8.53%, the IBEX 35 6.52%, and the FTSE 100 3.72%. Russia’s RTS
index and Ireland’s ISEQ were notable exceptions, posting respective quarterly
gains of 6.76% and 2.42%.2
In the Asia Pacific region, the
Shanghai Composite went +14.12% for the quarter even after all that slipping and
sliding. Pakistan’s KSE 100 rivaled that performance, going +13.78%. Other
quarterly gains and losses from the east: Sensex, -0.63%; Nikkei 225, +5.36%;
Kospi, +1.63%; S&P/ASX 200, -7.34%; Hang Seng, +5.42%; Jakarta Composite,
-11.02%. Looking at the Americas, we see gains of 7.56% for Argentina’s Merval,
3.04% for Mexico’s IPC All-Share, and 3.77% for Brazil’s Bovespa; Q2 brought a
loss of 2.34% for Canada’s TSX Composite.2
The major multi-country
benchmarks all went red in the quarter, registering the following losses: Global
Dow, 0.19%; Asia Dow, 0.54%; Europe Dow, 1.95%; Dow Jones Americas, 0.38%; STOXX
600, 4.02%; MSCI World Index, 0.30%; MSCI Emerging Markets Index,
0.24%.2,18
COMMODITIES MARKETS The second quarter of 2015 was
noticeably better than the first in the commodities sector: the Thomson
Reuters/Jefferies CRB Index rose 7.23% as the U.S. Dollar Index fell
2.92%.19,20
Oil staged a major rally in the
quarter, rising 24.9% on the NYMEX as it rebounded from a 6-year low. WTI crude
settled at on $59.04 on June 30. Cocoa futures also had a fine quarter, gaining
21.3%. Sugar futures rose 2.9%, lumber futures
3.6%.21,22
Metals, on the other hand, did
not gain ground in Q2. Gold wrapped up June at a COMEX price of $1,171.80, down
1.0% for the quarter and 1.0% YTD. After stumbling 6.7% for June, silver settled
at $15.58 on the COMEX June 30 yet was just -0.1% YTD. Platinum fell 5.6% in Q2
and palladium sank 8.5%; the end of Q2 found platinum at -10.8% YTD, palladium
-15.8% YTD. A dip in demand from China influenced copper’s 4.5% Q2
loss.21,23
REAL ESTATE What had been a lukewarm housing
market transformed into a hot one. The National Association of Realtors provide
ready evidence of that: after slipping 3.3% in April, existing home sales improved
5.1% in May to a seasonally adjusted annual rate of 5.35 million, the best pace in
almost six years and up 9.2% year-over-year. New home sales rose 8.1% in April and another 2.2%
in June according to the Census Bureau; that put their annualized sales rate at
546,000 (the best in seven years) and their year-over-year increase at
19.5%.24,25
This happened even with mortgage
rates on the way up. In the March 26 Freddie Mac Primary Mortgage Market Survey,
interest rates on assorted mortgages were as follows: 30-year FRM, 3.69%;
15-year FRM, 2.97%; 5/1-year ARM, 2.92%; 1-year ARM, 2.46%. By June 25, those
percentages had changed markedly: 30-year FRM, 4.02%; 15-year FRM, 3.21%;
5/1-year ARM, 2.98%; 1-year ARM, 2.50%.26
Now to the other key real estate
indicators during the quarter. Housing starts climbed 22.1% in April, then
faltered 11.1% during May; they were still up 5.1% annually after the May drop.
With an 11.8% May boost, building permits hit their highest level in almost
eight years and registered a 25.4% 12-month gain by Census Bureau calculations.
The overall April S&P/Case-Shiller home price index displayed a yearly gain
of 4.2% in housing values, ticking down from 4.3% in March. The NAR’s pending
home sales index rose but 0.9% in May after an April advance of
2.7%.27,28
LOOKING BACK…LOOKING FORWARD As the quarter ended, the four most
important U.S. indices settled as follows: DJIA, 17,619.51; Nasdaq, 4,986.87; S&P, 2,063.11; RUT,
1,253.95. June was the worst month for both the Dow and the S&P since January,
and that is reflected in the Q2 performance noted below. Like the Nasdaq, the
Russell 2000 advanced for Q2, albeit just 0.09%. The quarter’s best-performing
stateside index was the CBOE VIX: ending June at 18.23, it advanced 19.23% in three
months. The Nasdaq Bank Index finished second with a gain of 7.57%, the Nasdaq
Biotechnology Index third with a rise of 7.44%.2
%
CHANGE
|
Y-T-D
|
Q2
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
-1.14
|
-0.88
|
+4.71
|
+7.15
|
NASDAQ
|
+5.30
|
+1.75
|
+13.13
|
+14.24
|
S&P 500
|
+0.20
|
-0.23
|
+5.25
|
+7.32
|
REAL
YIELD
|
6/30
RATE
|
1 YR
AGO
|
5 YRS
AGO
|
10 YRS
AGO
|
10 YR TIPS
|
0.48%
|
0.27%
|
1.15%
|
1.67%
|
Sources:
wsj.com, bigcharts.com, treasury.gov –
6/30/152,29,30
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into
directly.
These returns do not include dividends.
In July, we have some relative
calm on Wall Street; at this writing, the selloff of June 29 has fortunately not
been replicated. It looks as though Greece’s creditors may just have to take a
haircut – since Greece cannot hope to function without access to credit,
negotiations to either restructure its debt repayments or lessen the principal
seem a given. So far, U.S. stocks have come through this crisis with far less
damage than European shares – and hopefully that continues with eurozone finance
ministers seeking an expedient solution and a new earnings season providing a
diversion. Perhaps the third quarter will bring relative calm and renewed
confidence for consumers and investors.31
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«RepresentativeDisclosure»
This material was prepared by MarketingPro, Inc., and does not necessarily
represent the views of the presenting party, nor their affiliates. This information
has been derived from sources believed to be accurate. MarketingPro,
Inc
. is not affiliated with any broker or brokerage firm that may be providing this
information to you. This information should not be construed as investment, tax or
legal advice and may not be relied on for the purpose of avoiding any Federal tax
penalty. This is not a solicitation or recommendation to purchase or sell any
investment or insurance product or service, and should not be relied upon as such.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded
blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index
of all over-the-counter common stocks traded on the National Association of
Securities Dealers Automated Quotation System. The Standard & Poor's 500
(S&P 500) is an unmanaged group of securities considered to be representative
of the stock market in general. It is not possible to invest directly in an index.
NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock
Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or
ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities
listing, trading and market data products and services. The New York Mercantile
Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange
and the preeminent trading forum for energy and precious metals, with trading
conducted through two divisions – the NYMEX Division, home to the energy, platinum,
and palladium markets, and the COMEX Division, on which all other metals trade. The
CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40
companies listed on the Paris Bourse. The FTSE MIB (Milano Italia Borsa) is the
benchmark stock market index for the Borsa Italiana, the Italian national stock
exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major
German companies trading on the Frankfurt Stock Exchange. The IBEX 35 is the
benchmark stock market index of the Bolsa de Madrid, Spain's principal stock
exchange. The FTSE 100 Index is a share index of the 100 most highly capitalized
companies listed on the London Stock Exchange. The RTS Index (abbreviated: RTSI,
Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian
stocks traded on the Moscow Exchange. The ISEQ Overall Index is a
capitalization-weighted index of all official list equities in the Irish Stock
Exchange, excluding U.K.-registered companies. The SSE Composite Index is an index
of all stocks (A and B shares) that are traded at the Shanghai Stock Exchange.
Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a
benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. BSE
Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index
composed of 30 stocks that started January 1, 1986. Nikkei 225 (Ticker: ^N225) is a
stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the
most watched index of Asian stocks. The Korea Composite Stock Price Index or KOSPI
is the major stock market index of South Korea, representing all common stocks
traded on the Korea Exchange. The S&P/ASX 200 is Australia's “premier” share
market index. The Hang Seng Index is a freefloat-adjusted market
capitalization-weighted stock market index that is the main indicator of the
overall market performance in Hong Kong. The IDX Composite or Jakarta Composite
Index is an index of all stocks that are traded on the Indonesia Stock Exchange
(IDX). The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most
important index of the Buenos Aires Stock Exchange. The Mexican IPC index (Indice
de Precios y Cotizaciones) is a capitalization-weighted index of the leading stocks
traded on the Mexican Stock Exchange. The Bovespa Index is a gross total return index
weighted by traded volume & is comprised of the most liquid stocks traded on
the Sao Paulo Stock Exchange. The S&P/TSX Composite Index is an index of the
stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX)
as measured by market capitalization.
The Global Dow (GDOW) is a 150-stock index of corporations from around the world,
created by Dow Jones & Company.
The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip
companies in the region. The Europe Dow measures the European equity markets by
tracking 30 leading blue-chip companies in the region.
The Dow Jones Americas Index measures the Latin American equity markets by tracking
30 leading blue-chip companies in the region. The Dow Jones STOXX 600 Index
captures more than 90% of the aggregate market cap of European-based companies. The
MSCI World Index is a free-float weighted equity index that includes developed
world markets, and does not include emerging markets. The MSCI Emerging Markets
Index is a float-adjusted market capitalization index consisting of indices in more
than 25 emerging economies. The US Dollar Index measures the performance of the
U.S. dollar against a basket of six currencies. Additional risks are associated
with international investing, such as currency fluctuations, political and economic
instability and differences in accounting standards. This material represents an
assessment of the market environment at a specific point in time and is not
intended to be a forecast of future events, or a guarantee of future results. Past
performance is no guarantee of future results. Investments will fluctuate and when redeemed may
be worth more or less than when originally invested. All information is believed to
be from reliable sources; however we make no representation as to its completeness
or accuracy. All economic and performance data is historical and not indicative of
future results. Market indices discussed are unmanaged. Investors cannot invest in
unmanaged indices. The publisher is not engaged in rendering legal, accounting or
other professional services. If assistance is needed, the reader is advised to
engage the services of a competent professional.
Citations.
1 -
marketwatch.com/story/us-stocks-end-higher-sp-500-breaks-9-quarter-win-streak-2015-06-30
[6/30/15]
2 -
online.wsj.com/mdc/public/page/2_3022-quarterly_gblstkidx.html
[6/30/15]
3 -
washingtonpost.com/blogs/wonkblog/wp/2015/06/17/federal-reserve-rate-hike-likely-before-year-end/
[6/17/15]
4 -
forbes.com/sites/samanthasharf/2015/07/02/jobs-report-u-s-added-223000-jobs-in-june-as-unemployment-rate-moved-down-to-5-3/
[7/2/15]
5 -
tinyurl.com/q587x8b [5/1/15]
6 -
instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm
[7/6/15]
7 -
briefing.com/Investor/Calendars/Economic/Releases/mich.htm
[7/2/15]
8 -
briefing.com/Investor/Calendars/Economic/Releases/conf.htm [7/2/15]
9 -
nytimes.com/2015/06/19/business/economy/us-consumer-prices-post-largest-gain-in-more-than-2-years.html
[6/19/15]
10 -
briefing.com/investor/calendars/economic/2015/06/22-26
[6/26/15]
11 -
briefing.com/Investor/Calendars/Economic/Releases/retail.htm
[6/11/15]
12 -
fxstreet.com/news/forex-news/article.aspx?storyid=76e5529c-495c-41db-89b8-0b5f68acfe40
[7/6/15]
13 -
fortune.com/2015/06/29/puerto-rico-economy-crisis/ [6/29/15]
14 -
tinyurl.com/os2pwyh [7/5/15]
15 -
theguardian.com/business/2015/jul/06/greek-referendum-what-happens-now-after-the-no-vote
[7/6/15]
16 -
theatlantic.com/international/archive/2015/07/chinas-nervewracking-stock-market-collapse/397724/
[7/4/15]
17 -
fxstreet.com/analysis/flash-comment/2015/06/29/ [6/29/15]
18
- msci.com/end-of-day-data-search [6/30/15]
19 -
investing.com/indices/thomson-reuters---jefferies-crb-historical-data
[7/5/15]
20 -
online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY
[7/5/15]
21 -
tinyurl.com/nf463kq [7/1/15]
22 - money.cnn.com/data/commodities/ [6/30/15]
23 -
coinnews.net/2015/06/30/gold-silver-dive-in-quarter-us-coin-sales-surge-in-june/
[6/30/15]
24 -
housingwire.com/articles/34260-first-time-buyers-boost-existing-home-sales-51-in-may
[6/22/15]
25 -
nasdaq.com/article/us-new-home-sales-climb-to-sevenyear-high-in-may-20150623-00645
[6/23/15]
26 -
freddiemac.com/pmms/archive.html [7/6/15]
27 -
tradingeconomics.com/united-states/housing-starts [6/16/15]
28 -
marketwatch.com/economy-politics/calendars/economic [6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F14&x=0&y=0
[6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F14&x=0&y=0
[6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F14&x=0&y=0
[6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F05&x=0&y=0
[6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F05&x=0&y=0
[6/30/15]
29 -
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F05&x=0&y=0
[6/30/15]
30 -
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[7/6/15]
31 -
tinyurl.com/qhe9pqc [7/6/15]
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