Market Beat: Second quarter market review
July 8, 2014
The stock market is doing well this year, with both the S&P 500 and the Dow Jones Industrial average at record levels. The Dow is pushing the 17,000 mark, and the S&P 500 is approaching 2,000. The NASDAQ has hit its highest mark since the year 2000 when it soared above 5000.
Year to date, the S&P 500 is up about 7.14 percent, the Dow is up about 2.68 percent, and the NASDAQ has posted a gain of over 5.54 percent. Precious metals have also posted some strong gains, with gold up over 10 percent and silver more than 8 percent
Bonds have also been rising as interest rates have been falling. The ETF for long term US Treasury bonds, the TLT, has posted gain of 11.45 percent, and the intermediate term Treasury fund, the IEF, has a gain of 4.37 percent.
Foreign markets have risen but are still lagging US markets. The foreign ETF for developed countries, the EFA, which stands for Europe, Asia and the Far East, is up 1.90 percent, and the emerging markets fund, the EEM, has a gain of 3.43 percent. The price of oil has also increased this year, with the oil ETF, USO, posting a gain of 10.08 percent.
The market hasn't seemed too concerned over the 1st quarter GDP growth that contracted at a minus -2.9 percent annualized rate. There are some good reasons for that. One was the weather, as the polar vortex created extreme cold in the east and Midwest. Another factor was that the Affordable Care Act led to decreased spending in health care. Emergency jobless benefits also ceased. Those, along with a couple of other factors, came together to have a negative impact on GDP growth, but it appears to be a one-time event.
There were also a lot of positives in the last quarter. Employment and total hours worked rose. The unemployment rate fell. Manufacturing and industrial production are continuing to expand. Personal income and consumer confidence are also growing, though the middle class continues to lag.
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So, the economy is growing but at a relatively slow pace. We have noticed a trend in recent years that post recession economic recoveries have been at a lower rate since 1982.
Corporate earnings season will get under way next week, and it will be interesting to see if profits and revenues can continue to grow. With the year half gone already, 2014 has been a pretty good year for the markets so far.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.