Capital Markets Recap - Acacia

Capital Markets Recap
July 2016
Market Returns as of July 31, 2016
15.0
12.7
10.0
5.0
12.0
7.7
4.0
4.4
6.0
5.1
5.1
2.7
0.6
0.8
0.0
5.9
5.0
4.0
2.7
0.4
-0.4
-5.0
-7.1
-10.0
US Equity
-15.0
Non-US Equity
Emerging Markets
MTD
YTD
Core Fixed Income
I/T Municipals
HY Bonds
1-Year
Source: Barclays Capital, Russell and MSCI . Returns are preliminary.
Despite the steady stream of negative market moving events, including the attempted Turkish military coup and the terrorist attack
in Nice, France, stock markets staged a strong rally in the month of July as economic data continued to point to global growth,
albeit slow.
Economic Data
•
Real GDP for the 2nd quarter grew at an annual rate of 1.2%, higher than the 0.8% annualized rate recorded in the 1st quarter,
but well below the 3-year average of 2.2% experienced between 2012-2015. Growth in the 2nd quarter was aided by strong
consumer spending, however, slower business spending detracted.
•
Inflation increased 0.2% during the month of June and 1.0% over the past 12 months. Despite low headline inflation, the core
inflation rate (CPI minus food and energy) remained stable, increasing 2.3% over the past year.
•
U.S. unemployment rate edged up by 0.2% in June to 4.9%. However, job growth bounced back in June following a weak jobs
report in May (287,000 new jobs were added to the economy in June versus a mere 11,000 added in May).
•
Consumer confidence held steady in July. According to the Conference Board, consumers were more positive about current
business and labor market conditions, but were slightly less optimistic about future expectations.
•
Global manufacturing growth improved in July, but still remained low. Global growth was supported by improvements in
the U.S. and China. China returned to growth in July, marking its first positive reading since February 2015. On the flip-side,
conditions in Japan continued to deteriorate despite aggressive monetary policies. Growth in Europe was mixed, with strong
growth in Germany and contractions in the U.K., France, and Greece.
U.S. Equities
•
Broad U.S. stocks posted strong returns in the July.
•
Size – Small and mid cap stocks outperformed large cap stocks both in July and on a year-to-date basis.
•
Style – Growth stocks outperformed value stocks during the month, but trailed on a year-to-date basis.
S&P 500 sector returns for the month of July:
Best
Worst
Information Technology
7.89%
Energy
-1.93%
Materials
5.10%
Consumer Staples
-0.71%
Health Care
4.94%
Utilities
-0.69%
International Equities
•
International developed stock markets snapped back sharply in July, but returns were not strong enough to recoup losses on a
one-year basis.
•
Emerging market equities posted strong returns in July and the asset class continued to recover losses experienced in 2015.
Fixed Income
•
U.S. interest rates remained low in July, leading to flat returns. The Federal Reserve decided to hold rates steady in July and will
meet again in September.
•
High yield bonds have continued to rally in July. The asset class is now one of the best performers on a year-to-date basis.
Looking Ahead
•
In this low interest rate environment, investors have favored high dividend paying stocks, such as utilities, which have provided
strong year-to-date performance. However, their current prices will be difficult to sustain without continued growth.
•
We therefore believe that active management is important in identifying companies that can grow their earnings in the future,
despite the macro economic environment.
•
We also believe that an important component of successful long-term investing is to be patient, allowing time for the
investment thesis of managers to play out.
www.acaciawealth.com
Meloni M. Hallock
310.246.0570
mhallock@acaciawealth.com
Alev Lewis
310.246.0530
alewis@acaciawealth.com
Amy Born
310.246.0520
aborn@acaciawealth.com
Acacia Wealth Advisors is registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC, and with HighTower Advisors, LLC, a
registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through
HighTower Advisors, LLC.
The information and opinions contained in this publication are intended for educational purposes and should not be construed as investment
advice. Further, the data was obtained from sources believed to be reliable, however accuracy cannot be guaranteed.