The second quarter market review will sound familiar to readers of last quarter’s review. Global markets rose (again), led by international markets (again). Bond markets advanced (again) and the only major asset class to produce negative returns was commodities (again).
Global equity market returns this year have been strongly positive and widely dispersed: in the first six months of 2017, 26 of the 30 largest stock markets in the world delivered positive returns. In 2017’s first quarter, growth in emerging markets helped support strong international returns. This quarter, it was their developed market counterparts, particularly in the Eurozone, that led the way. The most recent economic growth numbers in the European Union have beaten analyst expectations. Even the perpetual outcasts Spain, Italy, and Portugal have been growing steadily. Greece, however, still lingers near potential insolvency as the International Monetary Fund and the EU’s leaders remain unable to find a compromise on debt relief for the Mediterranean nation.
The US has now entered its 97th month of economic expansion, the third-longest in its history. US labor markets continue to strengthen and the unemployment rate is approaching the Federal Reserve’s projected natural rate of unemployment of 4.6%. Job openings are the highest on record, and the number of continuing unemployment claims the lowest in 50 years. Increased employment has yet to produce wage inflation, however, leaving analysts to ponder whether the job market has greater slack than the Federal Reserve believes. Against this backdrop, Fed Chair Yellen announced the fourth interest rate hike since the economic crisis. Another is expected in the second half of 2017.