Benchmark Review & Monthly Recap, June 2017

By Glenn Dorsey, Clark Capital

Most major stock indices posted gains for the month of June. Large cap stocks, as measured by the S&P 500, have increased every month since the election. The S&P 500 increased 0.62% for the month, while small cap stocks, as measured by the Russell 2000, increased 3.45%.

Value stocks took a leadership role, gaining 1.77% compared to growth stocks, which were unchanged for the month. Developed international stocks trailed domestic stocks as the MSCI EAFE Index declined 0.15% and the MSCI ACWI ex-USA Index increased 0.34%. Emerging market stocks increased by 1.04% for the month.

Fixed income markets turned in a mixed performance for June as interest rates increased over much of the yield curve in response to the FOMC’s rate increase to a range of 1% to 1.25% for the Fed Funds Rate. Credit conditions continued to improve during the month. As a result, corporate bonds outperformed Treasuries.

The yield curve steepened a bit during the month, although the 30-year Treasury bond yield declined by one basis point. The yield on the benchmark 10-year Treasury increased 14 basis points to 2.35% during the month. The Fed meets again July 25-26, and at this point, no change in rates is expected. There are four more FOMC meetings scheduled this year.

Related: Interest Rates Have Doubled: Beginning of the End of Central Bank Intervention?

The Bloomberg Barclays Aggregate Bond Index decreased by 0.10% for the month. Credit once again outperformed, with investment grade corporates increasing by 0.31% and high yield bonds increasing 0.14%. Treasuries and municipals declined by 0.16% and 0.36%, respectively.

EQUITY MARKETS

U.S. stocks, as measured by the S&P 500, again posted gains and continued their post-election rally. Value stocks easily outpaced growth stocks for the month and small cap stocks handily outperformed large cap stocks. Developed international stocks had a mixed performance, with the MSCI EAFE Index declining in value and the MSCI ACWI ex USA Index increasing in value. Emerging market stocks posted a gain for the month.

FIXED INCOME MARKETS

Rates increased across most of the yield curve with the exception of the 30-year bond, which declined by one basis point. The yield on the 10-year Treasury increased 14 basis points in June to 2.35%. The Bloomberg Barclays Aggregate Bond Index declined for the month, driven by Treasuries’ negative return. Credit exposure continued to be rewarded as investment grade corporates and high yield bonds turned in positive returns. Municipal bonds declined in value for the month.

ECONOMIC DATA

The economic acceleration experienced in April all but disappeared in May. Most economic data points showed lower levels than the previous month with the notable exceptions of new and existing home sales. First quarter GDP was revised up to 1.4% from 1.2%. New job openings, as reflected by the Job Opening and Labor Turnover Survey, hit an all-time high. Unfortunately, most other economic indices showed slower growth. As expected, The Federal Open Market Committee raised rates by .25% to a range of 1% to 1.25% at the meeting that concluded on June 14th. This is the second rate increase this year (out of four meetings). Four more meetings are scheduled to be held this year, with the next meeting scheduled for July 25-26. Presently, no rate increase is expected.

EventPeriodEstimateActualPriorRevised
Nonfarm PayrollMay182,000138,000211,000174,000
UnemploymentMay4.40%4.30%4.40%
ISM ManufacturingMay54.854.954.8
ISM Non-ManufacturingMay57.156.957.5
Retail Sales ex Auto & GasMay0.30%0.00%0.30%0.50%
PPI MOMMay0.00%0.00%0.50%
PPI MOM ex Food & EnergyMay0.10%0.30%0.40%
PPI YOYMay2.30%2.40%2.50%
PPI YOY ex Food & EnergyMay1.90%2.10%1.90%
CPI MOMMay0.00%-0.10%0.20%
CPI MOM ex Food & EnergyMay0.20%0.10%0.10%
CPI YOYMay2.00%1.90%2.20%
CPI YOY ex Food & EnergyMay1.90%1.70%1.90%
Industrial ProductionMay0.20%0.00%1.00%1.10%
Housing StartsMay1,220,0001,092,0001,172,0001,156,000
Building PermitsMay1,249,0001,168,0001,229,0001,228,000
New Home SalesMay590,000610,000569,000593,000
Existing Home SalesMay5,550,0005,620,0005,570,0005,560,000
Leading IndexMay0.30%0.30%0.30%0.20%
Durable Goods OrdersMay (P)-0.60%-1.10%-0.80%-0.90%
S&P CoreLogic CS 20-City YOYApr5.90%5.67%5.89%5.88%
Personal IncomeMay0.30%0.40%0.40%0.30%
Personal SpendingMay0.10%0.10%0.40%
GDP Annualized QOQ1Q (T)1.20%1.40%1.20%
Univ. of Mich. SentimentJun (F)94.595.194.5
F = Final, P = Preliminary, T = Third
Source: Bloomberg

Click here for a PDF of the Monthly Recap.

This article was written by Glenn Dorsey, Senior Vice President, Client Portfolio Manager, at Clark Capital Management Group, a participant in the ETF Strategist Channel.

Disclosures

Past performance is not indicative of future results. This is not financial advice or an offer to sell any product. Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. It should not be assumed that any of the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services can be found in its Form ADV which is available upon request. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation to buy, sell or hold any securities, other investments or to adopt any particular investment strategy or strategies. For educational use only. CCM-993

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