|
Data as of 3/12/10
|
2nd Qtr
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
-11.9%
|
-7.6%
|
12.1%
|
-11.8%
|
-2.9%
|
-3.4%
|
|
DJ Global ex US
(Foreign Stocks)
|
-12.6
|
-11.2
|
9.2
|
-12.7
|
1.3
|
0.0
|
|
10-year Treasury Note
(Yield Only)
|
3.8
|
N/A
|
3.5
|
5.0
|
3.9
|
6.0
|
|
Gold
(per ounce)
|
11.5
|
12.7
|
33.1
|
24.1
|
23.3
|
15.8
|
|
DJ-UBS Commodity Index
|
-4.8
|
-9.7
|
2.6
|
-9.5
|
-3.8
|
1.8
|
|
DJ Equity All REIT TR Index
|
-4.1
|
5.4
|
53.6
|
-8.8
|
0.4
|
10.2
|
| Notes: S&P 500, DJ Global ex US, 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.Past performance is no guarantee of
future results. Indices are unmanaged and cannot be invested into
directly. N/A means not applicable or not available. |
STOCK MARKET RALLY FALTERS ON
"MACRO" ISSUES
The stock market rally that began in March 2009 came to an
abrupt halt in the second quarter. Despite excellent first quarter
corporate earnings in the U.S., investors fretted about larger
issues that could overwhelm the economy in the months ahead. These
"macro" issues include unsustainable government debt levels in
numerous countries, the unwinding of stimulus spending, possible
deflation, persistently high unemployment, financial regulation,
and a government-orchestrated economic slowdown in China, according
to The Wall Street Journal, June 30. These concerns helped
send the S&P 500 index to an 11.9% decline in the quarter.
Second Quarter Country
Returns Based on the Dow Jones Global Indexes
Ranked by U.S. Dollar Performance
Winners
| Sri Lanka |
25.7% |
| Peru |
5.9 |
| Philippines |
5.8 |
| Iceland |
4.6 |
| Indonesia |
3.4 |
Other Notables
| Greece |
-39.3 |
| Spain |
-22.3 |
| France |
-20.5 |
| Brazil |
-14.8 |
| U.K. |
-14.0 |
Source: Dow Jones
Indexes
ECONOMY SLOWS DOWN
A variety of economic reports over the past few weeks suggest
the economy is slowing down. For example, home sales dropped,
consumer confidence slumped, manufacturing growth cooled off, and
new claims for unemployment insurance remained high, according to
Bloomberg, July 3. However, let's not get too carried away. A
slowdown does not necessarily mean we are headed for another
recession.
Today's weak economy puts policymakers in a tough spot.
Normally, fiscal and monetary stimulus is enough to jumpstart
growth. Unfortunately, we've shot those two rockets and we still
haven't reached escape velocity. If the economy rolls over from
here, the question becomes, "Where do we find a third rocket?"
According to Tony Crescenzi, strategist and portfolio manager at
Pimco, CNBC.com, June 7, our third rocket might consist of time,
devaluations, and debt restructurings. If fired, this third rocket
could be painful for many Americans.
INTEREST RATES DIVERGE BASED ON RISK
PERCEPTION
As the stock market declined, yields on U.S. government
securities declined, too, as investors fled to the perceived safety
of our government paper. During the quarter, the yield on the
10-year note declined from 3.8% to 3.0%, according to data from
Yahoo! Finance. This decline in yield occurred even though the
government issued more than $300 billion in new debt during the
quarter, according to The Wall Street Journal, July 1. It
was a different story in the corporate bond arena. Yields on
investment-grade corporate bonds and high-yield corporate (junk)
bonds rose as investors began pricing in added economic risk. In a
sign of growing risk aversion, the spread between yields on
corporate bonds and government bonds rose significantly, as
investors required a higher yield to hold the potentially riskier
corporate bonds.
THE DOLLAR REMAINS POPULAR
Some naysayers think the dollar's days are numbered, but that
countdown had yet to begin in the second quarter. The dollar index,
a measure of the dollar's strength compared to a trade-weighted
basket of six other currencies, rose a solid 5.9% in the second
quarter, according to MarketWatch, June 30. Two major trends are
apparently tugging at the dollar and in any given week, one trend
seems to outweigh the other. The euro zone debt crisis helped spark
a flight to the U.S. dollar and was a major reason why the dollar
jumped sharply in the second quarter. However, toward the end of
the quarter, disappointing economic numbers out of the U.S. and new
austerity measures in the euro zone led some investors to rethink
their dollar-haven strategy.
SUMMARY
The recovery from the recession hit a rough patch in the second
quarter as several economic indicators turned soft and the stock
market turned south. It's too soon to tell if this is the start of
a new leg down or simply a pause that refreshes. Either way, we
continue to do our best to help you reach your goals.
For your convenience the sources
have been listed below:
online.wsj.com/article/SB1000142405274870433460457533924...
noir.bloomberg.com/apps/news?pid=20601087&sid=aiFsUt6_88...
finance.yahoo.com/news/So-what-exactly-is-a-apf-718644427.ht...
www.cnbc.com/id/37555786/?Crescenzi_The_Keynesian_Endpo...
online.wsj.com/article/SB1000142405274870361510457532929...
www.contrarianvalueinvesting.com/2008/07/26/4-david-dreman-q...
www.marketwatch.com/story/dollar-slips-ecb-funding-results-boo...
