When I need to clear my mind, I put on my beat-up Saucony sneakers and drive to nearby Deer Lake Park in Burnaby, British Columbia. After a couple of miles, though, as my body gets into a rhythm, my mind wanders back to the thought that occupy it for hours each day: where will this market go next?
And I’ve thought a lot about what went on this summer. Since June 1:
‘S&P 500 is up 2.7%, having set a new record high in September;
‘MSCI World index is down 0.5%;
’10-year Treasury yield is down from 2.54% to 2.50%;
‘Brent Crude 0il is down 12.8%; and”Gold is down 2.2%.
The Bureau of Economic Analysis reported that the US economy expanded by 4.6% year on year in the second quarter, up sharply from the first quarter’s disappointing 2.1% annual decline. Consensus estimates for annual GDP growth in the third and fourth quarters of this year are about 3%.
The stage seems to be set for the fifth straight year of positive economic growth in the US; however, we’re always cautious about government-supplied information, especially during an election cycle.
At the moment, macro developments seem closely intertwined with stock market performance. Instead of slumping, the market was rather vibrant this summer. The S&P 500 showed resilience, reaching higher highs after a dip in late July and early August that coincided with increased uncertainty surrounding the Ukrainian crisis.
Geopolitics aside, the market was supported by GDP growth, which in turn was underpinned by strong corporate profits and margins. In fact, in the second quarter, the S&P 500 set a new record for profit margins: 9.1%. So much for ‘sell in May and go away.’
This post was published at The Burning Platform on September 30th, 2014.
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