July 9, 2015


Market Commentary July 2015

Stock Markets
Except for shares of Real Estate Investment Trusts (REITs), Equity Market Returns over Periods Ending 6 30 15which were down more than 10%, equity markets were about flat for the quarter. Results over various periods ending June 30, 2015 are shown in the chart at right. Ten-year returns are generally consistent with what can be expected over the long run. The three- and five-year returns are well into positive territory and, except for emerging markets, are above long-term averages. These periods show a positive environment for equity investments.

Over shorter periods, however, there is significant variability among equity market returns – some positive, others negative. Also, note that different markets are up when others are down. The relative consistency among markets over the longer term, with variability in the short run, is what can be expected from participating in global stock markets.

The Greek default to the International Monetary Fund (IMF) has been in the news. While this precipitated a large one-day drop in market values, the default seemed to have been taken in stride as markets have rebounded some as of this writing. There is no real news in this drama. The difficult trade-offs facing not only Greece but also other European economies are generally well known. It is reasonable to expect volatility in worldwide market prices as these issues are resolved. Attempting to predict the impact ahead of the market is a difficult process – best to let the “wisdom of the crowds,” as reflected in market prices, sort it all out.

Bond Markets
Yields ticked up this quarter – the ten-year Treasury rising to 2.3% from 1.9%. Because bond prices move inversely to yield changes, bond returns were negative – the longer the maturity the greater the loss. While the Fed continues to put off raising interest rates, bond yields seem to anticipate upward movement nonetheless. U.S. Treasury securities are attractive in periods of global uncertainty, which will tend to drive yields down in the short run.

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