Quarterly Market Review

The Markets

Ironically, good news for the economy translated into bad news for investors after the Fed provided its blueprint for winding down the quantitative easing efforts that have benefited financial markets in recent years. Until mid-May, equities seemed unstoppable as the Dow and S&P 500 powered to new all-time records. However, as the Fed’s outlook for continued moderate economic recovery grew more optimistic, both equities and bonds struggled in June. Still, domestic equities across the board managed a positive quarter, though gains were moderate compared to Q1’s sizzling pace.

The prospect of less Fed support also affected other markets. Investors began to anticipate a future with higher interest rates and sold off bonds across the board. The 10-year Treasury yield rose to its highest point since August 2011, and since bond prices tend to fall when interest rates rise, bond values were hit hard. Global equities were affected not only by the Fed but also by central bank decisions in China and Japan.

Despite some volatility, the dollar ended the quarter roughly where it began against a basket of six foreign currencies. However, gold’s slide accelerated after the Fed’s announcement; the precious metal briefly fell below $1,200 an ounce before ending with a $400 loss for the quarter. A stronger dollar helped keep oil prices in check despite concerns about Middle East supplies.

Equities data reflect price changes, not total return.