Two Steps Back, Two Steps Forward?

“Never mind.”

Source: Road Traffic Signs

That’s what I thought when I saw that US stocks had almost totally recovered. The S&P 500 is now within 1% of its pre-Brexit level. UK stocks are actually higher than they were—spurred on by a weaker British Pound. To be sure, other European stock markets are lower—those in Germany, France, and Italy. To be sure, the Pound and Euro are still down. And interest rates around the world are a lot lower. In the US, the 10-year US Treasury yields 1.4%–down from 1.75% before the vote.

And there’s the rub. The broad market averages may not have changed much, but inside the markets things are shifting, adjusting to a new reality. Within the US stock market, electric utilities and phone companies are hitting new highs, while bank stocks are struggling. If interest rates are going to be lower for longer, then bank interest rate margins are going to suffer. But companies that pay stable dividends will do well. And if they can add squeeze a little growth out of our slow-growth economy, that’s even better.

Source: Finviz

That’s the problem with averages. There can be a lot going on inside that isn’t readily apparent. The most defensive sectors of the market are rallying while cyclical stocks are struggling. That says something about where we are in the economic cycle.

Economies and markets are always adjusting to new circumstances, brought on by social and financial and technological innovations. Everything flows; nothing stands still. You can’t step into the same river twice. The only constant is change.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:21:54+00:00 July 1st, 2016|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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