Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is a B (favorable).
THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.
BUSINESS PROFITABILITY: This factor’s grade is a B– (slightly above average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 4. These risks deserve our ongoing attention.
Last week,U.S. Stocks and Foreign Stocks decreased while Bonds were little changed. During the last 12 months, STOCKS outperformed BONDS.
Returns through 7-3-2015
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
0.0
-.3
2.2
1.6
3.3
4.4
US Stocks-Standard & Poor’s 500
-1.1
1.9
7.3
17.5
17.7
7.9
Foreign Stocks- MS EAFE Developed Countries
-2.6
5.9
-3.4
11.5
9.6
5.2
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week, due to Laurie’s vacation, the show will be pre-recorded.
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Greece is the word that dominated global financial markets last week, as the country defaulted Tuesday night on a $1.72 billion repayment to the International Monetary Fund. The Greek government initiated capital controls and closed banks, while the country’s prime minister rejected the latest bailout offer from creditors. The government has called for a referendum on July 5 on whether to continue austerity measures insisted on by creditors, including the European Commission, the European Central Bank, and the International Monetary Fund.
Uncertainty about the future of the European Union and its currency led to a global selloff Monday as assets were repriced to account for the new level of risk. The Dow Jones Industrial Average fell 216 points, or 1.2% on the holiday-shortened week, to 17,730, while the Standard & Poor’s 500 index gave up 24.71 points to 2076. The Nasdaq Composite slid 71.29, or 1.4%, to 5009, its second consecutive weekly decline. Markets were closed Friday in honor of Independence Day.
Tuesday’s trading marked the end of the second quarter, in which the S&P 500 fell 4.78 points, snapping a nine-quarter winning streak. The Dow Industrials fell 156.61 points, or less than 1%, with all the losses coming in June. Top Dow performers in the quarter included JPMorgan Chase (ticker: JPM), Goldman Sachs (GS), Walt Disney (DIS), Microsoft (MSFT), and Nike (NKE). Bringing up the rear were Wal-Mart Stores (WMT), Travelers (TRV), DuPont (DD), Chevron (CVX), and Boeing (BA).
The Nasdaq Composite was the best-performing index in the quarter, marking a tenth straight quarterly advance, and ending up 85.98 points, or 1.75%, at 4986.87.
China’s Shanghai composite index continued a two-week slide and entered bear-market territory, down nearly 22% from mid-July in 2014, despite efforts of the government to prop it up by pushing through a rate cut.
Of more importance to investors would be a slowdown in Germany, a concern highlighted by Nancy Lazar, co-founder and chief economist at Cornerstone. The Russian recession and China slowdown have weighed on Germany, the biggest driver of the euro-zone recovery, and business confidence there has fallen, raising the specter of slowing growth. Cornerstone has lowered its 2015 forecast for German gross domestic product to 1.5% from 1.8%, buttressing its view that global GDP will slow.
Supports for the German economy include strong housing data and consumer confidence, driven by low unemployment, accelerating wages, and low interest rates.
