Commentaries

PMC Weekly Review - July 31, 2015

A Macro View - July Monthly Recap

Domestic equity markets rebounded quite nicely in July from the severe losses suffered in June. The S&P 500 posted its best monthly performance since February. Several factors were the primary drivers of the strong gains, including an uptick in domestic economic data; a resolution to the Greek bailout brinksmanship of prior months; economic data in China that was a bit more upbeat than anticipated; and solid earnings news both domestically and in Europe. Domestic economic data proved resilient during the month, with the first estimate of second quarter real gross domestic product (GDP) coming in at 2.3%, a bit below expectations, but ahead of the first quarter’s rate of 0.6%.

Within this context, stocks generated robust returns for the month. The S&P 500 gained about +2.5% for the month. The Dow Jones Industrials (DJIA), while positive, lagged the S&P 500 with a gain of about +0.8% for the month. The tech-heavy Nasdaq Composite Index rebounded nicely from its steep losses in June, advancing about +2.4% in July. The Russell 2000 Index of small cap stocks underperformed the Russell 1000 Index of large cap stocks, and growth stocks handily outperformed value stocks during the month. In terms of sector performance, the top performers in the month were, consumer staples, utilities and consumer discretionary. Energy and materials were the poorest performers, posting negative returns for the month. REITs bounced back from the significant losses of the prior two months, generating a return of more than +5.0%.

International equity markets did not fare quite as well as domestic markets during July, despite the resolution to the situation in Greece. In Europe, however, economies continue on the mend, and earnings are beginning to show signs of life. European markets posted their best performance since February, driven by positive earnings announcements and an increase in merger activity. The MSCI World ex-U.S. Index booked a slight gain of about +0.5% for the month. Emerging markets suffered again as commodity prices slumped. The MSCI Emerging Markets Index fell by about -7.7% for the month, but the MSCI EAFE Index, which measures developed markets performance, managed to eke out a slight gain of about +1.0%. Regionally, China saw its stock market bubble burst, with prices declining more than -11% during the month. Latin America also performed poorly, posting a decline of about -10.3%.

Fixed-income markets were mixed during July, as most market participants continued to position portfolios ahead of likely Federal Reserve action on interest rates in September. Treasury yield climbed to about 2.40% during the middle of the month, but then meandered back down to about 2.20% at the end of the month as economic data was not quite as robust as had been expected. However, analysts continue to believe that the U.S. economy is recovering well enough that the Fed will likely begin to raise interest rates in September, and perhaps once more by the end of the year. Within this environment, the 10-year U.S. Treasury yield ended the month at about 2.20%, down 14 basis points from the 2.34% level of June 30th. Broad-based fixed-income indices were higher in July, with the Barclays U.S. Aggregate Bond Index advancing about +0.4% for the month. Global fixed-income markets, however, performed poorly as the Barclays Global Aggregate ex-U.S. Index declined by about -1.0%. High yield indices were generally lower for the month, but short-term issues posted modest gains. Municipals also generated solid performance during July.

Download the full PDF

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results.

Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.

Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses.

Neither Envestnet, Envestnet|PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor.

© 2015 Envestnet. All rights reserved.

Featuring

Brandon Thomas
Chief Investment Officer

Articles By This Author

Video: Insights on Impact Economic and Market Overview: Second Quarter 2017 PMC Weekly Review - April 7, 2017 Economic and Market Overview: First Quarter 2017 Diversification: An Expensive Lunch Recently, But Free Over Time PMC Weekly Review - February 3, 2017 Economic and Market Overview: Fourth Quarter 2016 PMC Weekly Review - December 2, 2016 Post-Election, Will Markets and Portfolios Emerge Winners or Losers? Webinar Replay: Post-Election Winners and Losers PMC Weekly Review - November 4, 2016 Money Market Reform: What Does it Mean for Investors? PMC Weekly Review - October 7, 2016 Economic and Market Overview: Third Quarter 2016 PMC Weekly Review - September 2, 2016 PMC Weekly Review - August 5, 2016 Economic and Market Overview: Second Quarter 2016 PMC Weekly Review - July 1, 2016 Managing Volatility—A Little Planning Goes a Long Way A Surprise Brexit Leaves the Markets in Uncertain Territory Once Again PMC Weekly Review - June 3, 2016 PMC Weekly Review - May 6, 2016 Economic and Market Overview: First Quarter 2016 PMC Weekly Review - April 1, 2016 The Value of Value PMC Weekly Review - March 4, 2016 PMC Weekly Review - February 5, 2016 PMC Weekly Review - January 8, 2016 Economic and Market Overview: Fourth Quarter 2015 PMC Weekly Review - December 4, 2015 PMC Weekly Review - November 6, 2015 Economic and Market Overview: Third Quarter 2015 PMC Weekly Review -October 2, 2015 Smart Thinking PMC Weekly Review - September 4, 2015 Turmoil in Global Markets: China’s Currency Devaluation PMC Weekly Review - July 31, 2015 PMC Weekly Review - July 10, 2015 Economic and Market Overview: Second Quarter 2015 PMC Weekly Review - June 26, 2015 PMC Weekly Review - June 5, 2015 PMC Weekly Review - May 1, 2015 PMC Weekly Review - April 10, 2015 Economic and Market Overview: First Quarter 2015 Video: The PMC Spotlight: Quantitative Portfolios: Factor-Enhanced Series PMC Weekly Review - March 6, 2015 PMC Weekly Review - February 6, 2015 PMC Weekly Review - January 16, 2015 Economic and Market Overview: Fourth Quarter 2014 PMC Market Commentary: January 2, 2015 PMC Market Commentary: December 5, 2014 PMC Market Commentary: November 21, 2014 PMC Market Commentary: November 7, 2014 PMC Market Commentary: October 24, 2014 Economic and Market Overview: Third Quarter 2014 PMC Market Commentary: October 3, 2014 PMC Market Commentary: September 5, 2014 PMC Market Commentary: August 29, 2014 PMC Market Commentary: August 1, 2014 PMC Market Commentary: July 18, 2014 PMC Market Commentary: July 11, 2014 Economic and Market Overview: Second Quarter 2014 PMC Market Commentary: June 20, 2014 PMC Market Commentary: June 6, 2014 PMC Market Commentary: May 30, 2014 PMC Market Commentary: May 2, 2014 Economic and Market Overview: First Quarter 2014 PMC Market Commentary: April 4, 2014 PMC Market Commentary: March 7, 2014 Tracking Error Primer A Guide to PMC Quantitative Portfolios New Choices for New Challenges – The Case for Liquid Alternatives