June 2021 | Global Equity Markets Review
At first glance, it appeared U.S. equity markets had a quiet month in June with a continued march upward including eight record closing highs in the S&P 500. Daily volatility of closing prices in the S&P 500 was one of the lowest readings we have seen over the past 18 months as illustrated in the first chart below. However, market leadership shifted dramatically last month back toward large company growth stocks which were leaders during the early weeks of the pandemic. Rising concern over the Delta variant of the coronavirus was a contributor to the turbulence underneath the calm surface waters of the S&P 500 Index. In addition, debate intensified over inflation and peak growth rates which held back cyclical and value-oriented stocks after very strong performance in prior months.
The combined impact of these factors was a notable decline in market breadth as fewer stocks lifted the index to its record highs in June. The second graph below compares the number of stocks in the broad S&P 1500 Index within 5% of its 52-week high to the S&P 500 Index as a proxy of large company stocks. It is worth noting narrow market leadership is not healthy and is a reemerging trend we will follow closely. The S&P 500 Index total return for June was +2.3%, the S&P 400 Mid Cap Index was -1.0% and the S&P 600 Small Cap Index was +0.3%.
International markets lagged domestic returns in June in part due to a strong rebound in the U.S. dollar which depresses foreign returns for a U.S. investor. The 2.7% return in the dollar was the strongest monthly return of the year and the highest return since late 2016. Dollar volatilityhas increased recently with 2% monthly moves in either direction occurring six times over the past year, an unusual occurrence compared to long term patterns. The primary reason given for the rise in the U.S. currency last month was the perception the Federal Reserve is closer to raising rates than other major Central Banks. The emergence of the Delta variant is also responsible for dollar strength given the lower vaccination rates in many parts of the developed and emerging world compared to the U.S. For the month of June, the S&P Global ex-U.S. index return was -0.5% with Developed Economy ex-U.S. of -0.8% and the Emerging Economy index return of +0.5%. The strongest region last month was Latin America followed by Asia Pacific and Europe being the weakest.
Important Notes & Disclosures
Index Returns – all shown in US dollars
All returns shown trailing 6/30/2021 for the period indicated. “YTD” refers to the total return as of prior-year end, while the other returns are annualized. 3-month and annualized returns are shown for:
- The S&P 500 index is comprised of large capitalized companies across many sectors and is generally regarded as representative of US stock market and is provided in this presentation in that regard only.
- The S&P 500® Equal Weight Index (EWI) is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight - or 0.2% of the index total at each quarterly rebalance. The S&P 500 equal-weight index (S&P 500 EWI) series imposes equal weights on the index constituents included in the S&P 500 that are classified in the respective GICS® sector.
- The S&P 500 Growth Index is comprised of equities from the S&P 500 that exhibit strong growth characteristics and is weighted by market-capitalization.
- The S&P 500 Value Index is a market-capitalization weighted index comprising of equities from the S&P 500 that exhibit strong value characteristics such as book value to price ratio, cash flow to price ratio, sales to price ratio, and dividend yield.
- The Russell 3000 Index tracks the performance of 3000 U.S. corporations, determined by market-capitalization, and represents 98% of the investable equity market in the United States.
- The Russell Mid Cap Index measures the mid-cap segment performance of the U.S. equity market and is comprised of approximately 800 of the smallest securities based on current index membership and their market capitalization.
- The Russell 2000 Index is a market-capitalization weighted index that measures the performance of 2000 small-cap and mid-cap securities. The index was formulated to give investors an unbiased collection of the smallest tradable equities still meeting exchange listing requirements.
- The MSCI All Country World Index provides a measure of performance for the equity market throughout the world and is a free float-adjusted market capitalization weighted index.
- The MSCI EAFE Index is a market-capitalization weighted index and tracks the performance of small to large-cap equities in developed markets of Europe, Australasia, and the Far East.
- The MSCI Emerging Markets Index is a float-adjusted market-capitalization index that measures equity market performance in global emerging markets and cannot be purchased directly by investors.
- The S&P Global BMI sector indices are into sectors as defined by the widely used Global Industry Classification Standards (GICS) classifications. Each sector index comprises those companies included in the S&P Global BMI that are classified as members of respective GICS® sector. The S&P Global BMI Indices were introduced to provide a comprehensive benchmarking system for global equity investors. The S&P Global BMI is comprised of the S&P Emerging BMI and the S&P Developed BMI. It covers approximately 10,000 companies in 46 countries. To be considered for inclusion in the index, all listed stocks within the constituent country must have a float market capitalization of at least $100 million. For a country to be admitted, it must be politically stable and have legal property rights and procedures, among other criteria.
- The Barclay’s US Aggregate Index, a broad-based unmanaged bond index that is generally considered to be representative of the performance of the investment grade, US dollar-denominated, fixed-rate taxable bond market.
- The Bloomberg Barclay’s US Corporate High Yield Index, which covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market.
An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance to certain asset classes. Index performance used throughout is intended to illustrate historical market trends and performance. Indexes are managed and do not incur investment management fees. An investor is unable to invest in an index. Their performance does not reflect the expenses associated with the management of an actual portfolio. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. All investing involves risk including loss of principal. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal, and potential liquidity of the investment in a falling market. Past performance is no guarantee of future results.
Key Indicators correspond to various macro-economic and rate-related data points that we consider impactful to equity markets.
- The US 10-Year Treasury Yield (%)/bps, is the return on investment for the U.S. government’s 10-year debt obligation and serves as a signal for investor confidence.
- SPDR Gold Trust Price ($), is an investment fund that reflects the performance on the price of a gold bullion, less the Trust’s expenses.
- West Texas Intermediate, which is an oil benchmark and the underlying asset in the New York Mercantile Exchange’s oil futures contract.
- CBOE Volatility Index (Level)/% Change, which uses price options on the S&P 500 to estimate the market's expectation of 30-day volatility.
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