July 2015 Economic Update

July 2015 Economic Update

- by Robert Cron, Senior Portfolio Manager, Bronfman E.L. Rothschild

The economy

Global headlines trump steady U.S. economy

The U.S. economy continues to plod its way forward at a slow and steady pace. Short-term setbacks seem to be the norm, but a general sense of an improving economy is seen through many sectors. Consumer confidence has rallied as wages slowly increase and the unemployment rate drops, but labor force participation is weak, and GDP was confirmed negative for the first quarter. The focus on month-to-month indicators has been de-emphasized recently by the scale of global headlines that seems to be driving markets and investor sentiment. Having a steady economic backdrop is very helpful during a period of global challenges.

The stock market

Greece rattles markets with late June sell-off

Equities were hard-pressed to hold gains during June as U.S. stock markets sold off to close out the quarter. With debt payments missed and bailout talks at a standstill, Greece entered the U.S.’s Fourth of July holiday weekend with its eyes on a referendum vote, where Greek citizens ultimately voted against creditors’ conditions for further bailout aid. Many people believe this vote was a direct signal that Greece will be leaving the Euro. Markets seem to be taking the news in stride, as many investors expected this would happen. However, with Greek banks closed and questionable confidence in Europe, the longer-term uncertainty of any global effects is worrisome. We believe the U.S. is largely secluded from any direct effects from this situation, but it does bode well for a diversified approach and actively-managed international managers to take advantage of opportunities that may

The bond market

Bonds negative in Q2 as Fed mulls decision

Interest rates rose during the second quarter, leaving U.S. Government bonds with their worst loss since 2013. The yield on the 10-year Treasury rose over 0.50% during the second quarter, before closing June at 2.35% as caution over Greece pushed yields back down. Along with Greece, Puerto Rico has also garnered investors’ attention as they, too, are dealing with debt issues. Short-term fixes have cooled any immediate concerns, but the U.S. commonwealth’s $72 billion debt load is “unpayable,” according to the Puerto Rican Government. Attractive for their federal, state, and local tax exemptions, Puerto Rican bonds have found their way into U.S. investor portfolios and mutual funds. While not an overwhelmingly large part of any of the money manager portfolios that we use with clients, the drop in Puerto Rican bond prices has and will continue to have a small impact on performance. On a positive note, Standard & Poors upgraded the state of California’s debt to AA-, a sign that some state finances are improving.





Treasury yields

Stock indexes


Prime rate





Dow Jones




LIBOR rate (3 mos.)





S&P 500




Unemployment rate









15-year mortgage rate





Bond indexes


30-year mortgage rate





Broad Market Barclays Agg



CPI (12-mo. ending 4/30/2015)





US Corporate Barclays Capital



GDP (first quarter 2015)



US Government Barclays



Oil price (price/barrel)



Mortgage-Backed Barclays



Gold (oz.)



Data as of June 30, 2015 Source: The Wall Street Journal, US Department of Treasury


Greece, Puerto Rico make headlines as Q2 comes to a close.

Equity markets

China cuts interests rates, loosens reserve requirements in order to spur growth. The Shanghai Composite Index dropped 16% in June, but is still positive on the year.

Small cap stocks lead the way with greater focus on U.S. market.

Fixed income markets

Bronfman E.L. Rothschild, LP is a registered investment advisor. Securities, when offered, are offered through Baker Tilly Capital, LLC, member of FINRA and SIPC; Office of Supervisory Jurisdiction located at 10 Terrace Court, Madison, WI 53718, phone 800.362.7301. Bronfman E.L. Rothschild, LP and Baker Tilly Capital, LLC are not affiliated.

This publication should not be viewed as a recommendation, an offer to sell, or a solicitation of an offer to buy a particular security or service. The commentary provided is for informational purposes only and should not be relied on for accounting, legal, tax, or investment advice. Financial information is from third-party sources. While such information is believed to be reliable, it is not verified or guaranteed. Performance of any indexes is provided for reference and competitive purposes only without factoring any fees, commissions, and other charges. Individual results achieved by investors will be different from those of the indexes. Indexes are unmanaged; one cannot invest directly into an index. The views and opinions expressed are those of Bronfman E.L. Rothschild, LP, and they are subject to change at any time. Past performance does not imply or guarantee future results. Investing in securities involves risks, including possible loss of principal. Diversification cannot assure a profit or guarantee against a loss. Investing involves other forms of risk that are not described here. For that reason, you should contact an investment professional before acting on any information in this publication.

© 2015 Bronfman E.L. Rothschild, LP

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