US stocks continued their ascent in June, closing the month out at an all time high on the strength of economic news, reduced inflation fears, and hopes for additional stimulus. The President and a group of Senators reached a $1 trillion infrastructure plan after weeks of negotiations, however the likelihood and timing of passage are uncertain. Vaccinations continue with roughly 65% of the eligible US population over age 12 vaccinated, however the recent pace of vaccinations has slowed considerably. June economic news continued to show a generally improving economy. US job growth picked up pace in May with 559,000 jobs added, but was short of expectations. The unemployment rate fell to 5.8% from 6.1%. Manufacturing activity picked up pace and topped expectations. US home prices rose 24% in May from a year earlier and consumer confidence rose. On the other hand, US CPI rose 5% in May. It was the largest jump in 13 years, while core prices rose 3.8%, the most since 1992. Retail sales fell 1.3%, and the reading on durable goods orders disappointed.
Foreign stocks fell over the month as progress on vaccinations was countered by significant spread of the Delta variant of the coronavirus. The new highly contagious variant has slowed reopening plans, and, as a result, economic growth around the world. France, Italy, and Spain have extended government support measures for businesses as the region continues to struggle to bounce back from the pandemic. The ECB upgraded its economic forecast for the region, but said it would keep its aggressive monetary policies in place. Despite the headwinds, eurozone business activity is growing at the fastest pace in 15 years. China’s economy has cooled recently. While factory output remained strong, investment and domestic consumption were below expectations. China’s factory activity eased slightly in May, but was in line with expectations and the non-manufacturing sector improved. Emerging markets trailed developed markets over the quarter and year to date, but outpaced developed markets in June and over the trailing twelve months.
Bonds rose in June as investors began to doubt the recent uptick in inflation will be durable. After the Fed’s June meeting they estimated they would begin raising the Fed Funds Rate by the end of 2023, earlier than they previously projected. In prepared testimony before Congress, Fed Chief Powell said he expected job growth to improve in the coming months and inflation pressures to ease. The Fed also announced it would begin to unwind the corporate bond ETFs it purchased last year as part of its emergency measures with the holdings being liquidated by the end of the year. The 10-year Treasury yield continued to fall in June to end at 1.45%, down from 1.58% to start the month. It has fallen notably from the highs for the year reached in late March. However, it is up from 0.93% to start the year. Credit bonds led the way over the month and quarter, while Muni bonds were the top performer for the year to date. Longer term bonds topped shorter term bonds in June and the second quarter, but shorter term bonds have outpaced so far in 2021.
|Index Performance||June||2Q||Year to Date||Trl. 12 Months|
|US Stocks (Russell 3000)||2.47%||8.24%||15.11%||44.16%|
|Foreign Stocks (FTSE AW ex US)||-0.54%||5.62%||9.59%||36.79%|
|US Bond Mkt. (BBgBarc Int. Gov/Cred)||0.08%||0.98%||-0.90%||0.19%|
|Municipal Bonds (BBgBarc 1-10 Yr Muni)||0.05%||0.51%||0.31%||2.19%|
|Cash (ICE BofA ML 3-Mo T-Bill)||0.00%||0.00%||0.02%||0.09%|