RESOURCES | Abridged Market Recap

Market Commentary - Abridged
 
July 2008 — Abridged Monthly Market Recap:
View full version		 Posted August 7, 2008


Two steps forward, two steps back
  • Markets darted around sharply in July, though they ended the month nearly flat.
  • Fluctuating oil prices were a key driver of stock market swings.
  • Newly released economic data and lingering financial system concerns also contributed to volatility.
Domestic indices mostly flat
  • The Dow Jones Industrial Average (DJIA) gained 0.43 percent.
  • The S&P 500 Index (S&P) was down 0.84 percent.
    • The DJIA and S&P each rose or fell by more than 1 percent on 12 days—6 up and 6 down.
  • Value and small-cap stocks tended to outperform their growth and large-cap counterparts.
  • Foreign investments generally declined more than U.S. stocks.
    • The MSCI EAFE Index fell by 3.20 percent.
    • The MSCI Emerging Markets Index lost 3.39 percent.
Commodities back to Earth
  • Prices for oil, natural gas, and other commodities fell sharply in July.
  • The Dow Jones-AIG Commodity Index fell a precipitous 11.85 percent.
    • This reinforced the risks of investing too heavily in yesterdays winners.

Subprime exposure comes home to roost
  • Second quarter earnings revealed a tale of two economies.
    • Energy firms posted another quarter of record profits, and other industries posted modest gains as well.
    • Financial firms saw profits vaporize into staggering losses.
      • Overall S&P 500 earnings for the second quarter were down 17.90 percent year-over-year.
Economy sputtering, not stalled
  • The U.S. economy has proven surprisingly resilient.
    • Tax rebate checks helped contribute to 1.90-percent gross domestic product growth in the second quarter.
    • Consumer sentiment ticked higher, rebounding slightly from June lows.
  • Declining home prices continue to be a concern going forward.
    • Prices have declined an average of 15.80 percent nationwide in the past year, according to the S&P/Case-Shiller Home Price Index.
    • But rate of decline has slowed.
    • Seven of the 20 major cities tracked saw prices increase in May.
  • President Bush approved Congress mortgage relief bill.
    • $300 billion of federal funds will be available to backstop at-risk mortgages.
  • A bottom in home prices could provide a major lift to consumer sentiment—and quite possibly stock prices—in this years second half.



- John Blood, CFA, Chief Market Strategist, Commonwealth Financial Network
Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Dow Jones-AIG Commodity Index is composed of futures contracts on 19 physical commodities that are traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange.
HOME | OUR CLIENTS | OUR PHILOSOPHY | OUR PEOPLE | OUR SERVICES | RESOURCES | ACCOUNT ACCESS | CONTACT US | Professional Contacts
This communication is strictly intended for individuals residing in the states of
AL,AR,AZ,CA,CO,FL,GA,HI,IA,IL,IN,KS,KY,LA,MD,MI,MN,MO,MS,NC,NE,NH,NJ,NM,NY,OH,OK,OR,PA,TN,TX,VT,WA,WV,WY.
No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.

Securities offered through Commonwealth Financial Network ®, Member FINRA, SIPC
© Copyright 2006 - 2008