Monthly Market Monitor - July 2012

Market Indices1JulyYear-to-Date
S&P 500+1.39%+11.01%
Russell 3000+0.99%+10.40%
MSCI EAFE+1.15%+4.56%
MSCI Emerging Markets+2.02%+6.22%
Barclays U.S. Aggregate Bond+1.38%+3.78%
Barclays Municipal+1.59%+5.31%
Barclays US Corporate High Yield+1.90%+9.31%

U.S. equities performed slightly better in July than most other developed nations, as measured by the S&P 500's 1.4% return relative to the 1.2% return of the MSCI EAFE Index. On a year-to-date basis, U.S. equities remain well ahead of their international counterparts. For the first time in over two years, the major asset classes of stocks, bonds and commodities, along with the US dollar, posted simultaneous gains. July performances were in large part due to worsening global economic conditions that caused U.S. and European central bank policy makers to reassure markets with the promise or indication of additional stimulus measures. Led by drought-related record high corn prices, the S&P GSCI Total Return Index of 24 raw materials rose 6.4% in July, the most since October. Crude oil prices rose 3.2% in July, but remain down 11% on the year.

The Dow Jones Industrial Average and technology-focused NASDAQ Composite underperformed the S&P 500's 1.4% advance, returning 1.2% and 0.2% respectively. Large-cap stocks widely outperformed small-cap, as the Russell 2000, a proxy for small-cap equities, fell 1.4% in July. Growth-oriented stocks outperformed their value counterparts as the Russell 1000 Growth Index returned 1.3% versus 1% on the Russell 1000 Value Index.

In U.S. sector performance, eight of the ten S&P 500 major market groups advanced last month, led by strong gains in Telecom (+6.6%), Energy (+4.2%) and Consumer Staples (+2.8%). Materials (-1.2%) and Consumer Discretionary (-0.3%) lagged. For the year, all ten sectors remain in positive territory, with six sectors delivering double-digit performance. Telecom (+24.1%), Technology (+14.5%), and Financials (+13.9%) are the year's top performers.

Backed by hopes for new central bank economic stimulus, the MSCI EAFE Index, representing 22 of the world's 24 developed markets, but excluding the U.S. and Canada, returned 1.2% in July. Emerging markets likewise advanced, as the MSCI Emerging Markets Index rose to a two-month high and returned 2%, its second consecutive monthly increase.

Despite the modest July equity rally, global concerns over Europe's debt crisis again drove investors into the relative safety of U.S. government debt. As prices rose throughout the month, the yield on the benchmark 10-year Treasury note weakened to a new historic post-World War II low of 1.388% before closing out July with a yield of 1.469%. Following June's 0.3% decline, Treasuries returned nearly 1% last month, as measured by the Barclays US Government Bond Index.

Elsewhere in the credit markets, returns on U.S. investment grade bonds advanced last month, as the Barclays US Aggregate Bond Index rose 1.4%, following a 0.04% gain the month prior. Municipal bonds, as measured by the Barclays Municipal Index, delivered a positive return of 1.6% in May. Municipals extended YTD gains to 5.3% through the end of July. Non-investment grade corporate bond returns slightly slowed last month, as the Barclays US Corporate High Yield Index rose 1.9% in July versus the 2.1% return the month prior. High yield corporate bonds remain this year's best performing bond asset class.

  1. Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest)

This information is compiled by Cetera Financial Group. No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

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