After another three months of volatility, the major market averages didn’t move much in the second quarter, ending right about the same levels as the end of March. If it weren't for the last three days of the quarter, the markets would have been down a few percent. The Dow Jones Industrial Average declined (0.77%) for the quarter; the Nasdaq Composite declined (0.27%); the Russell 3000 Index was unchanged; and the S&P 500 declined (0.39%), excluding dividends. International markets, as measured by the MSCI EAFE Index, actually rose 1.83% during the quarter. The Barclays Capital Aggregate Bond Index was the big standout, increasing 2.29% during the quarter.
While the news over the past several weeks has been fairly negative, the one thing missing from the constant cascade of worrying headlines is any hint of deterioration in US corporate earnings, outside of the financial sector which has a separate set of problems. This doesn’t insulate the US stock market from the possibility of increased volatility in in the short term in reaction to news, but the overall recovery is likely to remain positive. So far this month most earnings reports have come in a bit better than expectations, which is a good sign.
