July market review

August 19, 2015

Shortly after the end of each month, our Chief Investment Strategist David Klassen provides highlights of the market and our funds’ performance. Following is a summarized review of July — 

Markets

  • US equities posted mixed returns for July; the S&P 500, which tracks domestic large cap stocks, was up 2.10% in July, and is up 3.35% year-to-date (YTD). The Russell 2000 Index, which tracks domestic small cap stocks, was down 1.16% in July but is up 3.54% YTD.
  • The international developed equity index (MSCI EAFE) was up 2.08% in July and is up 7.72% YTD. The emerging markets index (MSCI EM) was the worst performing international index, down 6.93% in July and down 4.19% YTD. China specifically experienced steep declines.
  • The Japanese Index (Nikkei 225) was up 1.73% in July, and is up 17.96% YTD.
  • In July, the 30-year bond yield decreased 21bps to 2.91%, the 10-year decreased 17bps to 2.18%, while the five-year decreased by 11bps to 1.53%. Bond yields move opposite prices, so treasury prices generally increased. The Federal Reserve again left the overnight lending rate unchanged at 0-0.25%.
  • Corporate bond prices increased in July, with the Barclays Aggregate Index up 0.70% for July, and down 0.59% YTD. The Credit Suisse Leveraged Loans Index (bank loans) was up 0.09% for July, and up 2.93% YTD.

Economic & Geopolitical Headlines

  • The US economy, measured by real gross domestic product (GDP), increased at an annual rate of 2.3% in the second quarter of 2015, according to “advanced” estimates released by the Bureau of Economic Analysis. This increase follows a revised annual growth rate of 0.6% for the first quarter of 2015.
  • Federal Chairwoman Yellen commented that recent turbulence in Greece, China and elsewhere overseas does not threaten the US economy enough to divert the Fed’s plans to raise short-term interest rates later this year. Federal officials indicated that rates could be moved as early as September.
  • Economic activity in the manufacturing sector saw a slower expansion in July, with a reading of 52.7 according to the Institute for Supply Management (ISM) versus expectations of 53.5 in June. A reading above 50 is considered economic expansion.
  • US job growth continues to increase. The Labor Department reported total nonfarm payroll employment increased 215,000 in July. The unemployment rate and the number of unemployed persons remain unchanged at 5.3 percent and 8.3 million respectively. May and June payroll employment were revised up from 254,000 to 260,000, and from 223,000 to 231,000 respectively. With these revisions, employment gains in May and June combined were 14,000 higher than previously reported.
 
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