Market Recap – Greek Bailout Plan Drives Short Term Moves

in Market Commentary by

Market Digest – Week Ending 6/12

Despite choppy day-to-day moves, both stocks and bonds finished little changed for the week. News flow regarding a Greek bailout plan was the primary driver of short term moves. The week ended with the IMF withdrawn from negotiations but a prevailing view that a solution will be reached to keep Greece in the Euro.

Weekly Returns:

S&P 500: 2,094 (+0.1%)
FTSE All-World ex-US: (+0.5%)
US 10 Year Treasury Yield: 2.39% (-0.01%)
Gold: $1,181 (+0.8%)
USD/EUR: $1.112 (+0.0%)

Major Events:

• Monday – At its Worldwide Developers Conference, Apple announced its own subscription-based, on-demand music service: Apple Music.
• Tuesday – European officials dismissed a Greek compromise proposal on its bailout, stating it was insufficient to meet creditors’ demands.
• Wednesday – A Russian-based cyber security firm found an Israeli-linked spy virus in the hotels used for Iran nuclear talks.
• Wednesday – Spotify raised an additional $526 million in funding amidst the new threat from Apple.
• Thursday – The International Monetary Fund halted its bailout talks with Greece due to a lack of progress.
• Friday – The US House of Representatives voted down a worker-aid program, which was a key component of the new trade deal proposed by Obama.

Our take:

With the S&P 500 up a meaningless 0.06% for the week, it feels appropriate to highlight the unusual lack of volatility in the equity markets. The S&P is now up 1.7% for the year, but as we approach the end of the quarter, it has yet to be up more than 3% or down more than 1% at any point. The full trading range for the year is 6.5%. Traditionally, a range less than 15% is somewhat unusual and a range over 20% is quite common. Meanwhile, the index has not had a 10% correction since October, 2011. Peaceful times, indeed.

Bonds are a little different. The US Aggregate bond market is down 2.4% so far this quarter – that is actually a pretty big move for the more stable asset class. 30 Year Treasuries are down close to 10%.

Ominously, the last similar streak without a correction in the S&P 500 ended in October, 2007. It is tempting to try to read something from the charts, but is usually a sucker’s game. The bull market could simply be taking a break or it could be worn out. There is no way to know and history gives mixed signals. Meanwhile, we remain near all-time highs. If you are a trader on Wall Street, volatility is your friend and how you make money. If not, enjoy the calm. It won’t last forever.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
Craig Birk, CFP®

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