July 13, 2015 | Market Update
Week in ReviewDomestic stocks and bonds, along with developed international equities, finished the week flat; however, the returns do not tell the whole story. The week started in a volatile fashion following the Greek referendum last Sunday, and the continued fall in Chinese stocks also weighed on global sentiment. By mid-week, renewed hopes for a Greek deal and unprecedented action by Chinese officials to stem their stock crash led to a reversal in equities.
The week was limited as far as data releases were concerned. U.S. job openings hit a 15-year high, a sign companies are opening and willing to hire. The Federal Reserve (Fed) uneventfully released minutes from its June meeting, and Alcoa released earnings to kick off a new round of corporate reports for the second quarter.
Bonds finished nearly flat on the week, with the yield on the closely followed 10-year U.S. Treasury dropping. Commodities fell sharply over concerns about China and the continuation of talks with Iran which could lead to Iranian oil adding to global supply.
Commodity ConundrumContinuing through the second quarter of 2015, commodities havent held their weight in gold. A combination of oversupply in the oil market (and the threat of more from Iran), the recent slump in Chinese shares, a resilient and strengthening U.S. dollar, and a wetter-than-expected summer in the Midwest have all weighed on the asset class.
The question of whether investors should continue to hold commodities as part of a balanced portfolio is naturally raised after periods of underperformance. To reiterate some of the points discussed here , commodities are a good place to be in times of inflation; low correlations provide incremental risk reduction in balanced portfolios; and relative to their own history, commodities may be undervalued.
The below graphic illustrates not only the recent pain experienced in commodities but the cyclical nature of the asset class. At a time when both stocks and bonds have experienced the opposite (strong) return cycles, one must avoid the temptation to abandon an important and beaten-down asset class.
A Look at The Markets
|Stock Market||LAST WEEK||QTD||YTD '15|
|Total U.S. Market1||+0.02||+0.58%||+2.53%|
|Domestic Large Cap Equity2||+0.03||+0.71%||+1.95%|
|Domestic Small Cap Equity3||+0.31||-0.14%||+4.61%|
|Fixed Income||LAST WEEK||QTD||YTD '15|
2S&P 500 Index
3Russell 2000 Index
4MSCI ACWI ex-U.S. Index
5MSCI EAFE Index
6iShares MSCI Emerging Markets Index 7Barclays Capital U.S. Aggregate Bond Index 8Barclays Capital 1-3 Month U.S. Treasury Bill Index
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by radical promoting and their editorial staff based on the original articles written by jeff cutter in the falmouth enterprise. This article has been rewritten for David Gaylorand the readers of David's Family Finance. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.