May Economic Report. Month ending May 31, McGladrey LLP. All Rights Reserved McGladrey LLP. All Rights Reserved.

Transcription

1 May Economic Report Month ending May 31, 2015

2 MARKET DASHBOARD Last Price Change % Chg. YTD % Last Price Change % Chg. YTD % S&P 500 2, % 1.6% Russell Global EM 3, % 4.3% Dow Industrials 17, % 0.1% 10-Year US Treas bps NM NM Nasdaq 5, % 7.0% DJ UBS Comm. Idx % -3.9% Russell , % 4.7% Gold $1, $ % -1.1% Euro Stoxx % 13.6% Crude Oil $ $ % 4.7% Shanghai Composite 5, % 55.3% Dollar % 6.7% Russell Global 1, % 3.4% VIX % -26.0% ; % change is based on price. S&P 500 : Trailing 180 Days 2150 One Week YTD Value Growth Value Growth L -0.60% -0.69% -0.78% -0.98% 1.63% 4.22% % -0.37% 0.04% 1.41% 3.52% 5.49% /8 12/22 1/5 1/19 2/2 2/16 3/2 3/16 3/30 4/13 4/27 5/11 5/25 S 0.80% 1.16% 1.50% 0.68% 4.67% 8.64% Sector Performance: S&P/Global Industry Classification Sectors (GICS) % Wgt in S&P 500 Week % Chg. YTD % Chg. Consumer Discretionary % 5.8% Consumer Staples % -2.5% Energy % -3.5% Financials % -0.1% Health Care % 8.3% Industrials % -1.4% Information Technology % 3.6% Materials % 2.5% Telecom Services % 0.6% Utilities % -10.3% VIX : Trailing 180 Days 10 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Wealth Growth of $1: Trailing 24 Months S&P 500 Dow Industrials Small Cap EAFE Emerging Mkts. 0.7 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 1

3 THE ECONOMY AND MARKETS A Macro View May Monthly Recap Domestic equity markets generally maintained positive momentum in May, following through on April s gains. The modest advance was hard-fought, as economic data during the month continued to indicate the economy is dealing with a so-called soft patch. The government s second estimate of first quarter real gross domestic product (GDP) was a very disappointing -0.7%, lower than the already low first estimate of 0.2%, and below analyst estimates. Despite the contraction in the quarter, analysts are quick to caution that the economy is not in a recession, and that the dismal report was a result of a confluence of several temporary factors. Also hovering over the market is anticipation as to when, and by how much, the Federal Reserve (Fed) might move to raise interest rates. Earlier this year analysts had been expecting the possibility of a move to begin to normalize rates at this month s meeting, but with the recent spate of discouraging economic data releases the first move is now expected to be sometime later this year. Within this context, stocks generated slight gains in May. The S&P 500 gained +1.3% for the month, and is now up +3.2% year-to-date. The Dow Jones Industrials (DJIA) advanced +1.4% for the month. The tech-heavy Nasdaq Composite advanced +2.8% in May. The Russell 2000 of small cap stocks outperformed the Russell 1000 of large cap stocks, with returns of +2.3% and +1.3%, respectively. Growth stocks slightly outperformed value stocks during the month. In terms of sector performance, the top performers in the month were health care, information technology and financials, with returns of +4.5%, +2.3% and +1.8%, respectively. Energy and telecommunications services were the poorest performers, with returns of -4.8% and -1.8%, respectively. Commodities slid during the month, declining -2.7%. REITs were little changed in May, as interest rates stabilized somewhat. International equity markets did not fare quite as well as domestic equity indexes during the month, as the situation in Greece continues to cloud the outlook. Developed markets, in particular, have been impacted by the bailout negotiations between Greece and its creditors. Inflation also is showing signs of accelerating in Europe, which has been the European Central Bank s objective with its asset purchase program. The MSCI World ex-u.s. declined -0.8% for the month, paring its year-to-date advance to +7.7%. Emerging markets slumped in May, as commodities prices reversed. The MSCI Emerging Markets fell by -4.0% for the month, and the MSCI EAFE, which measures developed markets performance, was down -0.4%. Regionally, Japan was one of the only markets to post positive performance during the month, delivering a +1.3% gain. Latin America and Eastern Europe were among the poorest relative performers, with results of -7.0% and -6.0%, respectively. Fixed-income markets were modestly lower in May, with Treasury returns remaining stable, but credit issues suffering losses. Investors have become increasingly nervous about the growth prospects of the economy, as well as the timetable for an interest rate increase by the Fed. Within this environment, the 10-year U.S. Treasury yield ended the month at 2.10%, up five basis points from the 2.05% level of April 30th. Broad-based fixed-income indices were lower in May, with the Barclays U.S. Aggregate Bond declining -0.2% for the month. Global fixed-income markets underperformed again after gaining ground the prior month, as the Barclays Global Aggregate ex-u.s. slumped -3.0%. Intermediateterm corporate bonds were lower, as the Barclays U.S. Corporate 5-10 Year fell by -0.3%. The Barclays U.S. Corporate High Yield posted a +0.3% advance. Municipals were weak for the second month in a row, falling by - 0.3% in May. 2

4 EUROZONE SELECTED EUROPEAN SOVEREIGN YIELD PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Germany 10-Yr. Govt bps NM NM France 10-Yr. Govt bps NM NM Greece 10-Yr. Govt bps NM NM Ireland 10-Yr. Govt bps NM NM Italy 10-Yr. Govt bps NM NM Portugal 10-Yr. Govt bps NM NM Spain 10-Yr. Govt bps NM NM Netherlands 10-Yr. Govt bps NM NM Belgium 10-Yr. Govt bps NM NM U.K. 10-Yr. Govt bps NM NM Basis points (bps) % Germany 10-Year Government Bond Yield Spain 10-Year Government Bond Yield % Italy 10-Year Government Bond Yield % % Greece 10-Year Government Bond Yield

5 EQUITIES WORLD MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % S&P 500 2, % 1.65% Swiss Market 9, % 1.35% Dow Industrials 17, % 0.15% CAC 40 (France) 4, % 15.17% Nasdaq Composite 5, % 7.02% DAX (Germany) 11, % 14.19% Russell Global 1, % 3.4% Irish Overall 6, % 16.80% Russell Global EM 3, % 4.3% Nikkei , % 17.25% S&P/TSX (Canada) 14, % 2.22% Hang Seng 27, % 15.48% Mexico IPC 44, % 3.28% Shanghai Composite 5, % 55.29% Brazil Bovespa 52, % 5.93% Kospi (S. Korea) 2, % 7.96% Euro Stoxx % 13.56% Taiwan Taiex 9, % 0.35% FTSE 100 6, % 3.63% Tel Aviv 25 1, % 15.82% IBEX 35 (Spain) 11, % 7.61% MICEX (Russia) 1, % 18.29% ; % change is based on price. Dow Jones Industrial Average -Trailing 90 Days 18,400 18,200 18,000 17,800 17,600 17,400 17,200 Nasdaq Composite-Trailing 90 Days 5,150 5,100 5,050 5,000 4,950 4,900 4,850 4,800 4,750 4,700 5,500 Shanghai Composite -Trailing 90 Days 420 Euro Stoxx -Trailing 90 Days 5, ,500 4,000 3,500 3, , ,

6 INTEREST RATES SELECTED INTEREST RATES Last Change % Chg. YTD % Last Change % Chg. YTD % 2-Yr. U.S. Treasury 0.71% -2 bps NM NM Prime Rate 3.25% 0.00 NM NM 5-Yr. U.S. Treasury 1.74% 27 bps NM NM Fed Funds Rate 0.25% 0.00 NM NM 10-Yr. U.S. Treasury 2.40% 31 bps NM NM Discount Rate 0.75% 0.00 NM NM 30-Yr. U.S. Treasury 3.11% 26 bps NM NM LIBOR (3 Mo.) 0.28% 0 bps NM NM German 10-Yr. Govt. 0.84% -33 bps NM NM Bond Buyer 40 Muni 4.18% 13 bps NM NM France 10-Yr. 1.16% -34 bps NM NM Bond Buyer 40 G.O. 3.81% NA NM NM Italy 10-Yr. 2.24% -34 bps NM NM Bond Buyer 40 Rev. 4.55% NA NM NM Fed 5-Yr Fwd BE Inf. 2.04% 0 bps NM NM YIELD CURVES 4.00 US Treasury Actives Curve US Treasury Actives Curve USD US Industrial (BB) BFV Cur USD Composite (BBB) BFV Curve M 1Y 3Y 5Y 8Y 10Y 15Y 20Y 30Y Year Treasury Yield - Trailing 180 Days 1.90 BBB/Baa- 10-Yr Treas. Spread Rising Line = Risk Aversion Yield %

7 CURRENCIES SELECTED CURRENCY PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % Dollar % 6.74% Chinese Yuan % 0.04% Euro % -8.15% Swiss Franc % 5.78% Japanese Yen % -4.63% New Zealand Dollar % -9.64% British Pound % -1.94% Brazilian Real % % Canadian Dollar % -6.58% Mexican Peso % -6.13% 102 U.S. Dollar - Trailing Six Months 1.30 Euro - U.S. Dollars per Euro Chinese yuan - yuan per U.S. Dollar Japanese yen - Yen per U.S. Dollar

8 COMMODITIES SELECTED COMMODITY MARKET PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % DJ UBS Comm. Idx % -3.91% Platinum Spot $1, $ % -9.28% Rogers Int. Comm. Idx % -4.81% Corn % % Crude Oil $ $ % 4.67% Wheat % % Natural Gas $2.59 -$ % % Soybeans % -9.57% Gasoline ($/Gal.) $2.76 $ % 23.13% Sugar % % Heating Oil % 1.78% Orange Juice % % Gold Spot $1, $ % -1.09% Aluminum 1, % -5.91% Silver Spot $ $ % 2.51% Copper 5, % -6.11% ; % change is based on price. 70 Crude Oil - Light Crude ($ per barrel) 1,350 Gold - Spot gold price ($ per ounce) 65 1, $ per barrel $ per ounce 1,250 1, , ,100 6,600 Copper 440 Corn - Active Contract 6, ,200 6,000 5,800 5,600 $ per bushel ,400 5, ,000 12/8 1/7 2/6 3/8 4/7 5/

9 ALTERNATIVE INVESTMENTS SELECTED ALTERNATIVE INVESTMENT INDEX PERFORMANCE Last Change % Chg. YTD % Last Change % Chg. YTD % HFRX Global Hedge Fund % 2.76% HFRX Distressed % 2.50% HFRX Equity Market Neutral % -0.09% HFRX Merger Arbitrage % 3.96% HFRX Equity Hedge % 3.62% HFRX Convertible Arbitrage % 3.30% HFRX Event-Driven % 3.32% HFRX Macro CTA % 0.73% HFRX Absolute Return % 2.25% IQ Fixed Income Beta Arb % -0.93% ; % change is based on price. HFRX Global Hedge Fund - Trailing 90 Days 1,265 1,260 1,255 1,250 1,245 1,240 1,235 1,230 1,225 1,220 1,215 HFRX Equity Hedge - Trailing 90 Days 1,240 1,230 1,220 1,210 1,200 1,190 1,180 1,170 1,010 HFRX Equity Market Neutral - Trailing 90 Days 1,410 IQ Fixed Income Beta Arb - Trailing 90 Days 1,005 1,405 1,000 1, ,395 1,390 1,385 1, , , ,365 8

10 PORTFOLIO CONSTRUCTION 3.50 S&P 500/MSCI EAFE - Trailing 180 Days 6.00 S&P 500/MSCI EM - Trailing 180 Days MSCI EAFE/MSCI EM - Trailing 180 Days Large Cap/Small Cap - Trailing 180 Days Growth/Value - Trailing 180 Days

11 PORTFOLIO CONSTRUCTION (cont d.) Info Tech/S&P Trailing 180 Days 1.90 Inv. Grade Bonds/Int. Govt. Bonds - Trailing 180 Days High Yield Bonds/Int. Govt. Bonds - Trailing 180 Days High Yield/Inv. Grade Bonds - Trailing 180 Days

12 This report is for illustrative purposes only. Past performance is not indicative of future results. The performance numbers displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. The indices discussed are unmanaged and do not incur management fees, transaction costs or other expenses associated with investable products. It is not possible to directly invest in an index. This information is not meant as a guide to investing, or as a source of specific investment recommendations, and McGladrey Wealth Management LLC makes no implied or express recommendations concerning the manner in which any client s accounts should or would be handled, as appropriate investment decisions depend upon the client s investment objectives. The information is general in nature and is not intended to be, and should not be construed as, legal or tax advice. In addition, the information is subject to change and, although based upon the information that McGladrey Wealth Management LLC believes to be reliable, is not guaranteed as to accuracy or completeness. McGladrey Wealth Management LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. McGladrey LLP Tax and accounting services are provided by McGladrey LLP, a registered CPA firm. Investment advisory, financial planning and other wealth management services are provided by McGladrey Wealth Management LLC, an SEC-registered investment advisor. McGladrey LLP is an Iowa limited liability partnership and the U.S. member firm of RSM International, a global network of independent accounting, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. McGladrey, the McGladrey logo, the McGladrey Classic logo, The power of being understood, Power comes from being understood, and Experience the power of being understood are registered trademarks of McGladrey LLP.