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Market Insights - August

Market Insights - August

Key takeaways as we pass the halfway point: 

  • Large company stocks as measured by the S&P 500 are doing extremely well, up nearly 5% this month through July 25th. 
  • 2nd quarter GDP was very strong, with initial estimates at 4.1% versus 2.2% in the first quarter.  This is the strongest growth in four years. 
  • The U.S. has one of the highest government bond yields in the developed markets, attracting investment from across the world and keeping the dollar strong. 

Keeping in mind the 2.86% yield on the five-year US Treasury, you can compare that with returns on selected European and Japanese five-year government bonds: 

  • Germany -0.24% 
  • Belgium-0.01% 
  • Netherlands-0.17% 
  • Sweden-0.03% 
  • Switzerland-0.41% 
  • Japan-0.09% 

These are negative nominal yields for government bonds; outside of the U.S; in other word, you are paying those governments to hold your money for five years; inflation would bring your real yield even lower.  While the European Central Bank (ECB) has plans to gradually phase out the easy-money policies that it implemented during the credit crisis, this is not expected to begin until next summer, somewhat later than projected. Japan’s interest rates, however, are expected to remain low for the indefinite future. 

Market returns YTD through 7/26/2018

  • The S&P 500 +7.3% 
  • The S&P Small-Cap 600 +14.0% 
  • The U.S. Aggregate bond index -1.7% 
  • The MSCI EAFE developed market Index - 0.55% 
  • The MSCI Emerging Markets Index -4.5% 

 

Gene Balerna, CIMA® Director, Investment Research
Steven Weber, Registered Investment Advisor
The Bedminster Group 

TAGGED: Market Insights
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