Stock markets finished the quarter on a down note. The S&P 500 and the global MSCI ACWI both dropped 1.3%. The Bloomberg BarCap Aggregate Bond Index shrugged off higher inflation and rose 0.3% last week.
The second quarter was a good one for U.S. stock investors. The S&P climbed 2.9%, erasing first quarter losses and leaving the index up 1.7% for 2018. Global stocks were down a tiny 0.1% in the second quarter and are down 1.5% on the year. Bonds posted a second straight quarter of losses, down 0.2%. Bonds are down 1.6% this year.
Key points for the week
- Core inflation hit the Federal Reserve’s target.
- The S&P 500 rose almost 3% in the second quarter after declining in the first.
- Bonds and global stocks declined slightly during the quarter.
Core PCE (personal consumption expenditures) finally reached the Federal Reserve’s stated target, almost. With some beneficial rounding, the Fed’s preferred measure of inflation reached its 2% target. It is the first time the measure has reached 2% in the last six years.
The May data suggest the trend is toward moderately higher inflation. May was the six month in a row that the monthly data increased by 0.2%. Higher energy prices, which are not part of the core measure, continue to increase. The added boost from energy prices pushed overall prices up 2.3% over where they were last year.
As long as employment growth remains strong and wages continue to increase, we expect core inflation to march higher and regularly meet or exceed 2% in coming months.
Source: Federal Reserve Bank of St. Louis https://www.federalreserve.gov/monetarypolicy/openmarket.htm
PCEPI Personal Consumption Expenditures: Chain Price Index
The Bush family added a new member last week, a service dog named Sully HW Bush. Sully is quite amazing. He can perform a two-page list of commands ranging from answering the phone to fetching needed items. Sully is the product of a nonprofit organization, America’s VetDogs, which provides service dogs to veterans free of charge. Sully even has an Instagram account to spread awareness of the importance of service dogs for individuals with disabilities.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.