News Releases
Monthly Investment Update – June 2010
Markets in Review
Domestic equity markets were down decisively in June, compounding the losses experienced in May. After four consecutive quarters of significant gains, the S&P 500 index closed out the 2nd quarter of 2010 down 11.86% for the quarter. The S&P 500 closed the month at 1,030.77, breaching the key support level of 1,040. Although all sectors were down for the quarter, cyclical sectors performed far worse, as the chart below illustrates:
| Quarterly Price Return: S&P 500 Index Groups | |
| For the Quarter Ended 6/30/2010 | |
| Utilities Index | -4.82% |
| Telecom Services Index | -5.65% |
| Consumer Staples Index | -8.85% |
| Consumer Discretionary Index | -11.20% |
| Health Care Index | -12.29% |
| Information Tech Index | -12.46% |
| Industrials Index | -12.79% |
| Energy Index | -13.23% |
| Financials Index | -13.56% |
| Materials Index | -15.72% |
Possibly reassessing long-term growth prospects, investors seemed to favor the contractual security of bonds and the tangible qualities of commodities over investments dependent on long-term spending growth. Gold continued its ascent, gaining an additional 2.14% during June and 11.59% for the quarter.
- Alex Rasmussen, CFA, CPA
Trust Portfolio Manager
| Market Stats (as of 6/30/2010) (source: Bloomberg LP) | |||
|---|---|---|---|
| MTD (%) | YTD (%) | 12-month (%) | |
| DJ Industial Average | -3.42 | -4.98 | 18.93 |
| S&P 500 Index | -5.23 | -6.64 | 14.43 |
| S&P 400 MidCap Index | -6.55 | -1.35 | 24.93 |
| Russell 2000 Index | -7.74 | -1.93 | 21.50 |
| EAFE(net) Index | -1.00 | -13.23 | 5.92 |
| DJ-UBS Commodity Index | 0.32 | -9.60 | 2.75 |
| BarCap US Aggregate Index | 1.57 | 5.33 | 9.50 |
| BarCap High Yield Index | 1.24 | 4.51 | 26.77 |
| Gold (spot price change) | 2.14 | 13.25 | 34.07 |
| U.S. Dollar Index (DXY) | -0.66 | 10.48 | 7.35 |
Action Items
"Problems are only opportunities dressed in work clothes."
— Henry J. Kaiser, father of modern American ship building
No question the global investment environment has its share of problems, whether it is European credit quality, domestic fiscal imbalances, squabbling on the Korean peninsula or the gusher in the gulf. All of this feeds market volatility and it seems harder and harder to get a "read" on where the market is headed. It appears that since the normalized market correction has played out, the market has been content to be range-bound until it decides whether to fully capitulate or begin another rally. We favor the latter scenario but continue to play defense, watchful to counteract what we see as deflation in the intermediate run and inflation in the longer.
During June, with a series of macro sell trades, we completed our phase-out of our remaining ProShares Short S&P 500 ETF (SH) to buy additional shares of the Vanguard Mega Cap 300 Value ETF (MGV). You will recall that MGV enhances the efficiency of our portfolios, blending in exposure to the largest value stocks in the USA. The profitable balance of our "cash-reserve-fund" the Vanguard Short-Term Federal Fund Admiral Shares (VSGDX) will be slated for positions in the emerging equity markets.
We'll close with a couple of positives for the market; first) whenever mid-term elections herald a rebalancing of power between the two major political parties, it means gridlock and the market prefers gridlock! And second) since 1932, there has never been a serious market decline in the third year of the Presidential Cycle of which there have been 19 tries. That bodes well going forward.
- Jerry R. Bayer, CFA
Vice President, Senior Trust Investment Officer
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