June 2016 Market Review from Sumner Wealth Management

 
 
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JUNE 2016

 
 

 In This Edition:

  • Market Review 
  • US Economy
  • International Economy
  • Insurance Updates
  • My Thoughts

 

 

Market Performance

Stock Market

MAY

 YTD '16

12-MONTH

 Total U.S. Market1  1.79% 3.41% 0.22%
   Domestic Large Cap Equity2 1.80%  3.57%  1.72% 
   Domestic Small Cap Equity3 2.25%  2.28%  -5.97% 
 International Equity4 -1.69%  0.52%  -11.39% 
   Developed International Equity5 -0.91%  -1.10%  -9.68% 
   Emerging Market Equity6 -3.73% 2.32%  -17.63% 

Fixed Income

MAY

 YTD '16

12-MONTH

 U.S. Bonds7 0.03%  3.45%  2.99% 
Cash Equivalent8 0.01%  0.09%  0.11% 
1Russell 3000 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   
 
 

Dear Visitor,

Despite plenty of bad news in recent months and years, it’s important to note that the U.S. stock market is currently experiencing one of its longest bull runs ever!  Since the start of the bull market in March 2009, the overall U.S. stock market has not seen a 20% loss from a peak to low price. However, there have been plenty of reasons to worry about the market during that time, including: the European debt crisis, U.S. debt downgrade, crises in Greece, Italy, and Spain, U.S. fiscal cliff and sequestration, taper risk, Ebola, Zika, Grexit, Brexit, weak dollar, strong dollar, potential Chinese global domination, potential Chinese market crash, skyrocketing commodity prices, crashing commodity prices, fear of rising interest rates, fear of plummeting interest rates, “worst presidential candidates ever”, massive debt, and the list goes on, and on, and on.  When the noise of chaos in the world gets too loud, it pays to remember that the financial markets are not coin flips. They typically generate positive gains, and they have more up days than down. They even have more up weeks than down, and as the duration stretches from months to quarters to years, the odds of gains improve. That makes sense because the economy grows over time, and the stock market participates in that economic growth. For a long-term investor to succeed, it pays to keep the historic perspective in mind, be patient, and not follow the news.

May Market Review

May was another decent month for the U.S. stock market. The overall market (Russell 3000) gained nearly 2%, with both large-caps (S&P 500) and small-caps (Russell 2000) up by about 2%. International stocks, however, relinquished their year-to-date advantage over U.S. stocks with losses in May. Developed markets (MSCI EAFE Index), such as Europe and Japan, lost 1%. Emerging market stocks (MSCI Emerging Markets), which include China and Brazil, lost 3%. Meanwhile, the bond market was essentially unchanged with only a small gain for the month. As of the end of May, bonds have still been outperforming the stock market so far this year. The 10-year Treasury ended last month with a yield of 1.92%.

Economy

After disappointing Institute of Supply Management (ISM) NonManufacturing and Non-Farm Payrolls reports for May, investors were looking for clues from Fed Chairwoman Janet Yellen if these softer economic reports had materially altered the Fed’s view regarding the path of short-term interest rates. While Chairwoman Yellen did acknowledge the jobs report as “concerning”, she did go on to reiterate that it was just one piece of data, and that “If the incoming data are consistent with labor market conditions strengthening and infl ation making progress toward our two percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate.” While the latest reads on infl ation data won’t be released until next week, this week witnessed mixed evidence on the health of the labor market. That is, the Fed’s Labor Market Conditions Index (comprised of 19 underlying indicators) showed increased deterioration (from -3.4 in April to -4.8 in May). However, weekly unemployment claims fell again this week, down to 264,000

International

International markets are now trailing the U.S. market in year-to-date returns and are significantly trailing over the last three- and five-year periods. Why hang on to non-U.S. investments? Whether it was due to heightened “Brexit” fears, angst over the upcoming U.S. political conventions in July, or driven by the European Central Bank (ECB) starting to buy corporate debt, sovereign bond yields fell noticeably this week. For example, the Ten Year German Bond now yields a scant 0.02 percent, and the yield on the Ten Year Japanese Government Bond has dropped to -0.15 percent. By comparison, the yield on the U.S. Ten Year Treasury Note fell seven basis points to end the week at 1.64 percent.  According to the CME Group, the probability of the Fed increasing short-term rates next week is less than fi ve percent. However, and unlike the Fed’s last meeting in late April, new economic projections will be released and Chairwoman Yellen will hold a press conference after the offi cial announcement. Investors will be listening for any signs of renewed stimulus from the Bank of Japan, now that Prime Minister Shinzo Abe has delayed an increase in Japan’s sales tax until 2019. Given that the referendum vote is on June 23, guidance from the Bank of England will be under a microscope after Governor Mark Carney has previously cautioned that a Brexit vote might trigger a recession.

Insurance

Insurance or "Protection" plays a vital role in financial planning.  Wheather it be, life, annuities, or long-term care, all of these products come into account for the final planning stages.  Most individuals are under insured, due to out dated policies, or surrendering the policy.  It's important to understand your policy, term or permanent, and if you can move or update you policy to protect your current financial situation.  If you have any questions about your policy, regardless if it is written by SWM, please do not hesitate to contact me.

Thoughts to Ponder?

It is often expected that investors should forecast what will happen in a variety of elections, economies, or markets. It just seems right that one should be proactive and act on information. However, when it comes to the markets, the best course of action for an enterprising investor is to wait for the markets to get emotional and then react. In other words, wait for “Mr. Market” to create opportunity.  Emotional investors, because of 2008, are nervous.  Why, the news, who makes a stroy, based on irrelivent imformaiton, so the audiance will listen. Talk with your advisor before making a move that could hinder your portfoliio.

 

 

Mark Sumner
Financial Advisor

Sumner Wealth Management, Inc.                
517 Alcove Road, Suite 202                                            
Mooresville, NC  28117                      
(704) 660-5510  Ext. 401                                        
www.sumnerwealthmanagement.com                                  


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