Another quarter has come to a close, and while it seems things are in a constant state of chaos, the reality is that many elements of our business and financial worlds are humming along, regardless of the distractions that crop up around us. To date, the markets continue to focus on the improvements made in each sector instead of bowing to the daily political activity (or inactivity) and onslaught of opinions from the media.
Recently, the Department of Labor reported that the U.S. economy added 222,000 jobs in June, a significantly higher number than most economic analysts were expecting. While the unemployment rate ticked up slightly to 4.4%, still close to its all-time low, analysts point to the fact that more job searchers entering the market is what’s responsible for this slight rise.
The U.S. and developed markets continue to maintain solid investment returns, with the S&P 500[i] increasing around 8% year to date, led by the technology and healthcare sectors. Supportive policy and low interest rates are fueling growth in international and emerging markets, making them an attractive investment option that we continue to consider. Proposed legislation for tax reform, healthcare, and regulation rollbacks could be positive for small and mid-cap stocks, as well as other sectors within the economy.
Interest rates have begun to tick upward, and we may see inflationary pressure from the recent market increase impact them further. However, the strength of the U.S. economy should have no issue absorbing the interest rate increases as the Fed makes them.
While all these are positive things, as always, risk still exists in our world. We’re currently in a state of political gridlock, with many ideas being pitched but execution seemingly a ways off. North Korea, China, and Russia all pose their own risks to our nation, as well as the global economy, which we will continue to watch and monitor as time marches forward. Oil and commodities weakened during the second quarter, which did pull the energy sector into the red. Supply and demand continues to be the catalyst to oil’s market performance.
As many of you have heard, Illinois finally reached a budget agreement by overriding Governor Rauner’s veto. However, it comes with a 32% income tax increase, and the state’s woes are far from over. Moody’s continues to threaten Illinois with a “junk” rating, and the state has many debts that are seemingly out of reach. We are currently unsure of its impacts, but our team will continually monitor the situation to ensure we do whatever we can to protect your investments from both risk and tax implications that may arise as results of this budget.
From our seat, we believe this quarter’s report to be mostly positive, with several opportunities for us to capitalize on as we continue to work with your portfolios relative to reaching your goals. This is the first time since 2010 that all major regions had positive earnings-per-share growth, and we hope to see that trend continue in the second half of this year.
Our team will continue to help you focus on your long-term goals and remain well diversified within your portfolio to help protect you from risk and the inevitability of uncertainty[ii]. We ask that you keep us informed towards any changes in your life that may impact your risk tolerance or goals.
From all of us at McCabe & Associates, thank you for your continued trust and partnership. If you’d like to discuss anything further, please reach out to us!
[i] The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
[ii] A diversified portfolio does not assure a profit or protect against a loss in a declining market