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June 22 2016

The world’s stock markets took it on the chin last week.

A one-two punch was delivered with the Federal Open Market Committee (FOMC) meeting leading and concerns Britain will leave the European Union following.

On Wednesday, the Federal Reserve confirmed what many had suspected. There would be no June rate hike. There was unexpected news, too. The Fed lowered its projections for U.S. growth to 2 percent through 2018. Barron’s reported the stance of various committee members had shifted from the previous meeting:

“At this week’s confab, there were seven projections for two increases, to 0.875 percent, and six for a single hike, to 0.625 percent. There also were two outliers expecting more hikes to above 1 percent. Excluding the highest and lowest guesses, the “central tendency” was in a range of 0.6-0.9 percent, according to the Fed’s projections…In March, however, there was a solid consensus of nine members expecting two hikes to 0.875 percent, and seven looking for more hikes to over 1 percent. Back then, the single outlier was calling for just one increase to 0.625 percent.”

In the past, dovish Fed actions have pushed U.S. stock markets higher; however, stocks were lower by the end of the day on Wednesday, according to
MarketWatch.

Investor reticence may owe much to concerns about the possibility of a British exit. Experts cited by Barron’s suggested an EU exit may already be priced into markets since European bank stocks “have been crushed…with some down 40 percent and others at lows not seen in years.”

Treasuries and high-quality government bonds rallied through the end of the week as investors opted for ‘safe haven’ investments*. On Friday, investors took profits after eight days of gains and rates pushed slightly higher, reported The Wall Street Journal.

*US treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit and market risk. They are guaranteed by the US government as to the timely payment of principal and interest and, if help to maturity, offer a fixed rate of return and fixed principal value.

  • Data as of 6/17/161-WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)-0.0120.013-0.0140.0810.1030.057
  • Dow Jones Global ex-U.S.-2.5-3.4-13.8-2-1.40
  • 10-year Treasury Note (Yield Only)1.6NA2.32.235.2
  • Gold (per ounce)1.221.59.6-2.3-3.48.5
  • Bloomberg Commodity Index-0.312.9-11.7-12.1-11-6.2
  • DJ Equity All REIT Total Return Index0.98.914.811.1127.3

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association
*S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
*Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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