While the stock market rallied hard in June, it was still down about 2% for the quarter. Through the second quarter the Dow was up 6.8%, EAFE (International) up 3.38% Barclays U.S. Government Intermediate 2.1%. Fortunately, most of our client portfolios have quite a bit of bond exposure and made some money in those accounts off setting most of the decline in the equity prices. This will continue as long as it appears we are still in a Secular Bear Market (see images at end of article).
In general, bad news for the economy (Europe’s included) is generally good news for U.S. Treasury Bonds and there was plenty of bad news to go around. Obviously, things are very bad in Europe highlighted be high interest rates on Spain and Italy’s debt that threatens to bankrupt both countries.
At home, the employment situation continues to be very ugly as the “official” unemployment rate is 8.2% (41 months in a row over 8%). The “official” jobless rate does not capture the longstanding sluggishness of the job market. The underemployment rate — which includes discouraged job-seekers who have stopped looking for work, part-time workers who prefer full-time jobs and the unemployed — rose to 14.9% in June from the previous month. Also, the number of Americans out of work at least six months remained near record high levels at 5.4 million, or 42% of all those unemployed.
Dismal June job figures could also prompt the Federal Reserve to take further action to try to boost the economy. The Fed last month downgraded its economic outlook for 2012. It predicted growth of just 1.9 percent to 2.4 percent for the year and little change in the unemployment rate.
Many company earnings results will be announced in the next couple weeks and that may affect the overall mood of the stock and bond markets. The fate of the Euro and its member countries will continue to become clearer over time.
I expect choppy waters in anticipation of the November election. As I have stated before, the November election results will greatly affect the future of our country, your life, and the future performance of many of the investments we have to choose from.
Don’t hesitate to contact me to discuss your financial plan or portfolio.
As you can see, volatility and frequent large rallies are the norm and not the exception” in secular bear markets. Here’s the previous secular bear (1966-1981) as an example. Yes, the 54% decline by 2009 was greater than the 45% in 1974, but the pattern of numerous short-term surges and falls had again repeated.