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Second quarter market review

The stock market is doing well this year, with both the S&P 500 and the Dow Jones Industrial average at record levels. The Dow is pushing the 17,000 mark, and the S&P 500 is approaching 2,000. The NASDAQ has hit its highest mark since the year 2000 when it soared above 5000.

Year to date, the S&P 500 is up about 7.14 percent, the Dow is up about 2.68 percent, and the NASDAQ has posted a gain of over 5.54 percent. Precious metals have also posted some strong gains, with gold up over 10 percent and silver more than 8 percent

Bonds have also been rising as interest rates have been falling. The ETF for long term US Treasury bonds, the TLT, has posted gain of 11.45 percent, and the intermediate term Treasury fund, the IEF, has a gain of 4.37 percent.

Foreign markets have risen but are still lagging US markets. The foreign ETF for developed countries, the EFA, which stands for Europe, Asia and the Far East, is up 1.90 percent, and the emerging markets fund, the EEM, has a gain of 3.43 percent. The price of oil has also increased this year, with the oil ETF, USO, posting a gain of 10.08 percent.

The market hasn’t seemed too concerned over the 1st quarter GDP growth that contracted at a minus -2.9 percent annualized rate. There are some good reasons for that. One was the weather, as the polar vortex created extreme cold in the east and Midwest. Another factor was that the Affordable Care Act led to decreased spending in health care. Emergency jobless benefits also ceased. Those, along with a couple of other factors, came together to have a negative impact on GDP growth, but it appears to be a one-time event.

There were also a lot of positives in the last quarter. Employment and total hours worked rose. The unemployment rate fell. Manufacturing and industrial production are continuing to expand. Personal income and consumer confidence are also growing, though the middle class continues to lag.

So, the economy is growing but at a relatively slow pace. We have noticed a trend in recent years that post recession economic recoveries have been at a lower rate since 1982.

Corporate earnings season will get under way next week, and it will be interesting to see if profits and revenues can continue to grow. With the year half gone already, 2014 has been a pretty good year for the markets so far.

Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.

Statistics and other information have been compiled from various sources. Universal Value Advisors believes the facts and information to be accurate and credible but makes no guarantee to the complete accuracy of this information. A more detailed description of the company, its management and practices is contained in its “Firm Brochure” (Form ADV, Part 2A) which may be obtained by contacting UVA at: 9222 Prototype Dr., Reno, NV  89521.  Ph: (775) 284-7778.


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