Stocks Continued to Rally in Q2, Mixed Signals Persist

Global equity investors enjoyed another quarter of strong performance as the S&P 500 Index rose 3.1% and the MSCI All Country World Index (ex US) gained 3.3%. Emerging markets led developed markets for the second consecutive quarter as the MSCI Emerging Markets Index jumped 6.6%. Year to date, these three indexes increased 9.3%, 8.7% and 14.8%, respectively, in their local currencies. When foreign-sourced returns are translated into depreciated US Dollars, however, the MSCI All Country World Index (ex US) and the MSCI Emerging Markets Index are up 14.1% and 18.4% year to date. Geographically diversified US investors should be pleased.

Drops in long term bond yields and oil prices during the quarter were concerning, however. It is unusual for a decline of such magnitude as we have seen in the price of oil since 2014 to be unaccompanied by recession (see chart), and lower bond yields sometimes presage economic downturns.

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