Market Pulse: Bull market intact through second quarter |

Market Pulse: Bull market intact through second quarter

David Vomund

The bull market is intact with the S&P 500 rising 2.5 percent in the second quarter.

Technology stocks continued their leadership, as reflected in the Nasdaq’s 3.9 percent gain. As strong as the domestic market has been, international markets were better still, aided by a falling dollar.

Most of the stock gains came in the first two months of the quarter. In June, roles reversed as the lagging areas (health care, financials, steel, etc.) led while the high-flying technology stocks retreated. Until the June reversal market participation was quite narrow.

A handful of big-cap tech stocks (Apple, Facebook, and Amazon among them) have dominated the market this year while most other issues are up or down slightly. In fact, five technology issues account for 40 percent of the S&P’s gain this year. If you don’t own them, it’s been a nice, but hardly headline-worthy year.

Another way to view the narrowness of the market rally is to examine how many stocks are near their highs versus their lows. On June 19, the day the media announced “Record Highs!” there were about as many stocks in the S&P 1500 index that were 20 percent or more off their highs compared to those that were within 2 percent of their highs.

Does the market rally point toward an improving economy? Not so fast. Utilities are near their highs, U.S. Treasury yields are down, and the yield curve is flattening. That wouldn’t happen if growth expectations were high.

A better explanation rides on the hope of a corporate tax cut. Tax cuts will increase profits, which will boost stock prices. If tax cuts are in jeopardy or even delayed more than expected, enthusiasm could and should wane. Even though Congress is having trouble with health care, tax cuts still appear likely.

Where does this leave investors? One needn’t be entirely in one camp (strong growth) or the other (slow growth), and we’re not. Depending on your investment profile (growth versus stability) some of my holdings are closely tied to the economy and faster gross domestic product growth (Nasdaq 100 ETF and Emerging Market ETF) while many are not (Black Hills, Pfizer, AT&T).

Then there are the income vehicles — preferreds and exchange-traded debt. They continue to provide the best risk-adjusted returns.

David Vomund is an Incline Village-based, fee-only money manager. Information is found at or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.

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