Upbeat End to Raucous Quarter

The three major domestic equity indices ultimately ended in positive territory for the second quarter, after zigging and zagging on headline news, particularly toward the end of June.

Volatility due to the threats of escalation on trade continues to be an overhang on the market, explains Ed Mills, Raymond James managing director of equity research and Washington policy analyst. In the past month, the administration has threatened an additional $400 billion worth of tariffs on Chinese goods, and reports circulated that the administration had planned to invoke an emergency economic power to restrict Chinese tech investment in the United States and implement export controls on technology transfers.

Uncertainty, in this case regarding global trade tensions, often leads to concern among investors. And it seemed investors were trying to digest somewhat conflicting reports of peak earnings, tariff threats and political divisiveness, shrinking yield spreads, lower unemployment and gradually rising inflation.

Foreign financial markets weathered an eventful month as well, as global tariffs hurt these traditionally more open economies. However, Raymond James European Strategist Chris Bailey believes that any lessening of these concerns – which remains very plausible – provides investment opportunities.

Despite end-of-the-month volatility, all of the major domestic equity indices were up for the second quarter. A longer view shows that the NASDAQ, the Standard & Poor’s 500 and the Russell 2000 ended the first half of the year in healthy territory, but the Dow Jones Industrial Average didn’t keep pace.

 
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Definitions:

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.

Saul Baumann