Investors had to be happy with the performance of the stock market in June. The profits were the best of the month since 1955. The monthly results were even better: 7.2% higher, the best since 1938. Regarding, it had its best June since 2000, an increase of 6.9%.
SPX: Dow: NASDAQ 300 Minute Chart
Indeed, the stock market is also good for the year: the S & P 500 + 17.4%, after a gain of 3.8% in the second quarter; the Dow was 14.1% for the same period and the NASDAQ is higher at 20.66%. Similarly, futures trading suggests that US equities will rise sharply on Monday, with the S&P 500 and the Dow potentially hitting new 52-week highs.
Extra volatility, more abrupt movements
There is much that investors can love. Apart from the abrupt and often frightening pullbacks that have erupted repeatedly over the past year and a half. These have resulted in a decrease of 20% or so in the fourth quarter of 2018 and roughly 7% just last May.
Between the 2016 elections and the end of 2017, the major American indices have only had one month. But since January 2018, the S & P and NASDAQ have had six consecutive months, the Dow, five.
As a result, the year-to-date gain of S & P 500 at the end of June was lower than that of the benchmark at the end of April. It is also possible that there is more on the agenda, but not on Mondays.
At present, financial markets are largely dominated by forces that have driven rapid movements up and down, including:
Trade tensions between the United States and China.
Unrest in the Middle East where the United States almost attacked the Iranian military facilities.
Concerns about North Korea and its options for nuclear weapons.
Automated trading programs that take algorithmic buying and selling decisions.
July begins with the first three problems on hold, the catalysts for Monday's expected rally.
The United States and China have agreed to continue negotiations on the trade dispute. The rates are kept at the current level and American technology companies can sell products to Huawei, the Chinese telecommunications giant.
The United States did not attack Iran, partly because President Donald Trump wants to get American forces from the Middle East.
Concerns about North Korea were diffuse on Sunday when Trump and Kim Jong-un met for 45 minutes in the Demilitarized Zone that separates North and South Korea. They agreed to resume talks about reducing the nuclear arsenal in North Korea.
Unexpected Results; A number of deep-rooted problems
Yet any superficial calmness is being lied to by some unexpected results that could indicate deeper problems:
Most of the profit took place during the first quarter when the shares bounced after the great slump last fall. Profit in the second quarter was much more moderate.
Utility companies were consistent winners. The 13.7% achieved in the second quarter because falling interest rates made their stable and lucrative dividends attractive. During the 6.6% cut of the S&P 500 in May, the Dow utility & # 39; s decreased by only 0.7%; the index hit five new highlights between May 24 and Wednesday.
McDonald & # 39; s also reached new highs . The stock (NYSE 🙂 won 17% in the first half. The most recent rise came on Friday when it reached nearly $ 208, only pennies from its highest point in 52 weeks.
Apple could rise 25% in the year but that's after the stock (NASDAQ 🙂 fell 30% in the fourth quarter of 2018. And it's still more than 15% below his 52-week high reached last fall.
Microsoft was the Dow leader in the first half. The software giant (NASDAQ 🙂 – once mocked as one-compared to Apple or Amazon (NASDAQ 🙂 – was the second best performer in Q2, after Disney (NYSE :), whose shares took off when it was the announced the launch of its streaming service in the fall.
Microsoft is the only share with a market capitalization of more than $ 1 trillion but it can be vulnerable. The underlying 12-month P / E ratio is almost 30. (Amazon's lagging P / E ratio is 70, but investors have never really cared.)
Landscape looks good, but …
So what's the future? It depends on. First, whether the events that cause short, sharp vagrants (tariff threats, military threats, nuclear threats) are minimized. Traders and their algorithms hate uncertainty.
The current situation is predominantly favorable for equities. Interest rates are lower. The Treasury closed the quarter with 2.0%, a decrease of 25% this year due to concerns about a slowdown in the global economy. The US economy is growing at around 3% a year, to the impatience of the Trump government, but a recession seems unlikely.
The domestic, 3.6% in May, has fallen by 64% since a peak of 10% in October 2009. Two-thirds have fallen since their peak in March 2009.
Large companies continue to buy back their shares, spreading profits across fewer shares and supporting prices. Admittedly, the buy-back of the first quarter of $ 205.8 billion was 7.7% lower than in the fourth quarter, but by 8.9% compared to a year earlier, according to S&P Dow-Jones Indices. Apple has already purchased $ 23.1 billion worth of shares in the first quarter
However, framed against those factors are some potential headwinds:
US production is slowing down, indicating that the trade dispute between the US and China is a major problem.
Traditional retail is struggling with e-tail competition. Nordstrom (NYSE 🙂 is the biggest loser of the S&P 500 this year, 30.5% less. Macy & # 39; s (NYSE 🙂 and Kohl & # 39; s (NYSE 🙂 decreased by 28%.
The agricultural economy is struggling because it is so dependent on export markets. prices have increased by 3% this year, but a third by the end of 2012.
