During the summer months some of us like to cook outside – and slow cookers seem to be all the rage this year! The food may seem to take forever to cook, and we often can become impatient waiting for signs of progress.

We may have the same feeling when contemplating most of the world investment markets. Investors have finally decided that a diet of foreign bonds paying negative interest is unhealthy. While in the U.S. we are still w-a-i-t-i-n-g for the Federal Reserve to raise interest rates. The latest forecast is for a September rate increase. We can only hope! In the meantime the bond markets are suffering and definitely cooling. We saw big declines in bond values and returns for the second quarter, as hope for an interest rate increase in June evaporated.

Consumers in the U.S. enjoyed a little relief as energy costs declined – a useful prelude to the summer driving season instead of the usual increases in gas prices. Housing is recovering, employment is stabilizing and, although excruciatingly slow – we are indeed cooking here!

Foreign producers of energy however have been miserable – and we may again see defaults in Brazil, Argentina and many other exporters of raw commodities. China is diverting attention from their slowing economy by military adventures in the South China Sea. Overall, almost all foreign markets are sputtering – even the ones like China and India which did well in 2014.

Greece is the main concern in Europe although it contributes only 1.5% of GDP. The entire Greek economy produces about $242 Billion in goods and services per year, but the country now owes $340 Billion. Hosting the Summer Olympics started the problem – but it has increased each year. Bond markets in Greece are now out of time, and the EU out of patience.

The total European Stock Market is worth10 Trillion Euros – with Greece total market cap being under 20 Billion Euros – a small fraction. The forecast for the Greek economy and well-being of its people is dire, especially now that they voted a resounding no to their referendum on the bailout, yet we suspect that given time and effort, both Greece and the EU will survive.

As you can see in the above chart, most markets were flat or down for the quarter and the year to date. The decline in the S&P 500 on June 29th was 3.42% and it recovered a little on June 30th, so we are still waiting for our 5% correction! We always expect at least one per year and have not had one since October 2011. We look forward to it arriving and setting the stage for more robust future growth, instead of the simmering, very slow growth we are experiencing now.


The SH&J Team

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