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MARKET HIGHLIGHTS: Q2 2015
The US economy has been “interesting” over the past three months. The second quarter began with history-making market highs on Wall Street. The Dow Jones hit 18,351, the S&P 500 leapt to 2,134, and the NASDAQ ended the quarter at 5,164. Those new highs had everyone talking about the potential for a “market bubble.”
However, a number of strong economic indicators helped to dispel most of the “bubble” talk. The second quarter saw an improvement in the private sector’s labor picture, an increase in consumer spending (the main driver of US growth) and, as a consequence, a growing—albeit slowly—US economy. But continued turmoil in the European markets effectively muted the earlier jumps, leaving us with relatively modest gains year-to-date.
That being said, most portfolios did experience a very small decline for the quarter (on average 1% or less). While no one wants to see a loss of any size in our portfolios, this minimal level of fluctuation is to be expected. In reality, it illustrates that we’re actually achieving an optimal balance of prudent risk with a disciplined approach to growth. A portfolio with a less diversified, riskier approach would have had a far greater swing into the red.
Once again, despite growing speculation to the contrary, the Federal Reserve Bank held off on an interest rate hike. Janet Yellen blamed lagging exports (generally the result of a too strong dollar), some residual weakness in the labor market, and subdued wage growth. Moreover, the Fed is concerned that a rate hike would continue to negatively impact trade and put undue pressure on developing nations. Yellen and other Fed members have said that data would drive their decision. However, the likelihood is that if the “troubles” in the global economy continue then a hike in US interest rates could very well remain in the distant future.
Within the US, whether you agreed or disagreed, I see the recent Supreme Court decisions as stabilizing factors. No matter your political perspective, dismantling “Obamacare” would have been a disruptive and costly event. Legalizing same-sex marriage has had a harmonizing effect on legislation that may be more far reaching than any of us realize or can anticipate. Overall, I see us moving in a direction of calm, strength, and (dare I say it) richness as a nation.