Weekly Stock Market Update
Stock Market Update – Week of 6/30/2014
Different Reactions in Global Equity Markets to Revised U.S. Q1 GDP Release
After the disappointing U.S. GDP announcement on June 25, which came in at -2.9%, equity markets around in the U.S. and Europe reacted differently. Domestically, the S&P 500 returned 0.48% on the day and reminded us of the “bad economic news is good market news” environment that was witnessed throughout much of 2012 and 2013, as stocks traded up on bad economic data due to the expectation of continued monetary easing. Across the Atlantic, where much of the Eurozone is now exhibiting signs of a sustainable economic recovery, equity markets sung a slightly different tune. Below is a summary of Europe’s markets’ returns from 8:00am until the U.S. market open and then from the U.S. market open until the European markets’ close.
Sources: Bloomberg Markets as of 7/1/14
You will notice that the European markets sold off between 8:00am (GDP was released at 8:30am) until the U.S. markets opened at 9:30am. Once the U.S. market opened and treated this information favorably Europe joined in and rebounded.
While the European markets still finished the day with marginal losses the change in direction exhibited was a reminder that central banks are still supporting low interest rates as economic growth seems to be taking hold. The U.S. being further along in the economic cycle is potential reason for the overall difference in market returns not just for June 25 but for the first half of 2014. As Europe’s recovery continues, we believe growth opportunities in European equity markets will continue to emerge. Investors should consider the effect this environment can have on their portfolio holdings and keep a forward looking view on how to incorporate this information into their investment decisions.
Important Information and Disclaimers
Past Performance is not a guide to future performance.
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MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest U.S. companies based on total market capitalization and represents about 98% of the investible U.S. Equity market.
ML BOFA U.S. Corp Mstr [Merill Lynch U.S. Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire U.S. corporate bond market over time.
ML Muni Master [Merill Lynch U.S. Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITSs that primarily own and operate income-producing real estate.