August 2016 Markets Insight
Adam E Bray CFP®
Chief Investment Officer
During July, the S&P 500 Index finally eclipsed its prior all-time closing high setback on May 21, 2015.1
Since the bull market started in 2009, there have been 45 record highs for the S&P 500 Index in 2013; 53 in 2014; and 10 in 2015.2 Since topping the prior high on July 11, the S&P 500 has gone on to close at six more highs during the month.1
Keep in mind that, by itself, a new high isn’t a reason to go to cash.
Table 1: Key Index Returns
| |
MTD % |
YTD % |
3 - Year*% |
| Dow Jones Industrial Average |
+ 2.8 |
+ 5.8 |
+ 5.9 |
| NASDAQ Composite |
+ 6.6 |
+ 3.1 |
+ 12.8 |
| S&P 500 Index |
+ 3.6 |
+ 6.3 |
+ 8.9 |
| Russell 2000 Index |
+ 5.9 |
+ 7.4 |
+ 5.4 |
| MSCI World-ex USA** |
+ 4.9 |
- 0.2 |
- 0.9 |
| MSCI Emerging Markets** |
+ 4.7 |
+ 10.0 |
- 2.7 |
Source: Wall Street Journal, MSCI.com
MTD returns: Jun 30, 2016—Jul 29, 2016
YTD returns: December 31, 2015—Jul 29, 2016
*Annualized
**in US dollars
Oil prices took a dive in July, which will likely put added pressure on earnings in the energy sector. And the dollar has recently ticked higher, which may create added headwinds for firms that do a significant amount of business overseas.
Meanwhile, let’s not discount the positive impact from strong corporate buybacks of shares.
Over the last 12 months ending March 31, S&P 500 companies shelled out a record $589.4 billion to repurchase shares of their own stock, according to S&P Dow Jones Indexes.
Undoubtedly, there is plenty of economic uncertainty, which discourages firms from making significant investments in new factories and equipment. But it’s not discouraging companies from trying to support share prices via buybacks.
I recognize that we are in an uncertain period. As the economic recovery enters its eighth year, the expansion is no longer young.3 It’s been a substandard economic recovery, global uncertainty is high, and we are in an unusual election cycle.
As the saying goes "When a train goes through a tunnel and it gets dark, you don’t throw away the ticket and jump off. You sit still and trust the engineer."
1 St. Louis Federal Reserve
2 LPL Research
3 National Bureau of Economic Research
These are the opinions of Chief Investment Officer Adam E Bray CFP® and not necessarily those of Cambridge. The views expressed herein are for
informational purposes only and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested
into directly. Past performance is not a guarantee of future results.