US stocks climbed in June, hitting new record highs, and had the best first half of a year since 1997. The gains were driven by expectations that the Fed and other central banks will ease monetary policy. Comments from Fed Chair Powell showed that a cut from the current Fed Funds target of 2.25% to 2.5% was likely if trade policy negatively impacted the economy. The US and Mexico reached a deal to avoid the implementation of tariffs threatened by President Trump. Economic news pointed to an economy still growing, but slowing down. The May unemployment report fell well short of expectations with 75,000 new hires and April and March’s hiring was revised down. The unemployment rate held at 3.6% and wage growth remained at 3.1%. US factory activity posted its lowest reading since October 2016, retail sales rose less than expected, consumer confidence fell to its lowest level since September 2017 and inflation remained muted. In June, US stocks soared, gaining 7.02%, bringing the second quarter and year to date returns to 4.10% and 18.71%, respectively.
Foreign stocks bounced back in June driven by more accommodative central banks. A eurozone manufacturing survey showed manufacturers were at their most downbeat since September 2013. The European Economic Sentiment Indicator was at its lowest since August 2016 and German business sentiment hit its lowest level since 2014. The European Central Bank (ECB) said at the end of their June meeting they were not making any benchmark rate adjustments until at least the second half of 2020 and opened the door to a possible rate cut – a significant change in policy. Later in the month, ECB President Draghi said the central bank could roll out fresh stimulus as soon as July. China’s manufacturing fell sharply into contraction territory in May. The Chinese government said it would accelerate the funding of infrastructure projects, injecting fresh stimulus for the country’s economy. Emerging markets outpaced developed markets in June, but trailed over the second quarter and year to date. Foreign stocks jumped 5.91% in June and are now up 3.13% and 13.72% for the second quarter and year to date, respectively.
Bonds moved higher in June as interest rates continued to ease. The Federal Reserve held the Fed Funds Rate steady after its June meeting, however, comments by the interest rate-setting body led investors to strongly believe an interest rate cut was coming later this year if trade uncertainties do not improve and the economy softens further. The 10-year Treasury yield dropped to finish the month at 2.00% down from 2.14% at the beginning of June and 2.69% to start the year. It ended the month at its lowest level since November 2016. For the month, quarter and year to date, longer-term bonds outpaced shorter-term bonds and credit bonds were the top-performing sector. The broad bond market rose 1.26% in June and 3.08% for the second quarter. For the year to date, bonds have surged 6.11%.
| Index Performance | June | 2Q | YTD | Trl. 1 Yr. |
| US Stock (Russell 3000) | 7.02% | 4.10% | 18.71% | 8.98% |
| Foreign Stock (FTSE AW ex-US) | 5.91% | 3.13% | 13.72% | 1.65% |
| Total US Bond Mkt. (BarCap Aggregate) | 1.26% | 3.08% | 6.11% | 7.87% |
| Short US Gov. Bonds (BarCap Gov 1-5 Yr) | 0.66% | 1.85% | 3.09% | 4.94% |
| Municipal Bonds (BarCap 1-10yr Muni) | 0.43% | 1.64% | 3.88% | 5.49% |
| Cash (ICE ML 3Month T-Bill) | 0.20% | 0.62% | 1.22% | 2.28% |