Market Recap – Q2 Ends in Volatility Tied to Events in Greece

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Market Digest – Week Ending 7/2

Q2 ended with a spike of volatility related to events in Greece. The S&P dropped 2% on Monday then recovered nearly half of that over the rest of the week. The final loss was 1.2%, breaking a streak of 9 consecutive weeks with a change of less than 1%. The index did hit a double digit streak with its tenth consecutive positive return. But barely, the actual index level fell and it was only because of dividends that the total return squeezed out a 0.2% return for the quarter. Bonds fell in Q2, meaning most US investors lost money in the quarter.

Weekly Returns:
S&P 500: 2,077 (-1.2%)
FTSE All-World ex-US: (-2.1%)
US 10 Year Treasury Yield: 2.38% (-0.09%)
Gold: $1,166 (-0.8%)
USD/EUR: $1.109 (-0.7%)

Major Events:
• Monday – Greece shut down its banking system, imposed capital controls, and missed a $1.7 billion payment due to the IMF. Global stock indexes fell over 2%.
• Monday –Puerto Rico said it can’t pay its debts, sending Puerto Rican bonds lower.
• Monday – The Supreme Court temporarily blocked Texas from implementing new restrictions on abortion clinics.
• Tuesday – A federal appeals court upheld a ruling finding Apple liable for conspiring to raise ebook prices.
• Tuesday – A 17 year old Liberian died of Ebola, sparking concerns of resurgence after the disease was declared eradicated in May.
• Wednesday – At least 117 people died in fighting between Islamist militants and Egyptian army forces in the northern Sinai Peninsula.
• Wednesday – Companies and business groups attacked a White House proposal which would expand overtime eligibility to about 5 million more Americans.
• Thursday – BP agreed to pay $18.7 billion to settle claims for the 2010 Gulf of Mexico oil spill.
• Thursday – U.S. employers added 223,000 jobs in June and the unemployment rate fell to 5.3%. But the report was considered dissappointing, leading some to believe the Fed is less likely to raise rates in September.
• Friday – US Markets are closed in observance of Independence Day.

Our take:
Greece is often considered the birthplace of democracy. Ancient Athens was a direct democracy featuring direct participation of eligible citizens. When most of us think of democracy today, we think of a representative form like we have in the US. We elect leaders who are supposed to act on our behalf.

So it was a surprise when Greece announced a popular referendum to accept or reject creditor austerity requirements. It sounds like a nice gesture, but one wonders how the average Greek citizen is supposed to know what is best for them or their country in this situation. The ballot itself is confusing and what it means is confusing. Many assume it is a vote to stay in the Euro or not, but it isn’t. Regardless of the outcome, a compromise could still be met, or not.

A resounding “Yes” will likely mean the current government’s days are numbered. Other than that, we’re not sure what the vote this weekend will mean. It likely won’t mark the end of this ongoing saga. One thing that has become apparent is the stock market no longer cares all that much. If Greece is forced to leave the Euro it will cause some waves, but it won’t be the main driver of stocks in the second half of 2015.
It can at times be difficult to find much to like about our elected representatives. The more time you spend looking at Europe, however, the more you may appreciate them.

Happy 4th of July from all of us at Personal Capital!

And good luck to the US Women’s soccer team in the World Cup final on Sunday.

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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.

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