Weekly Market RecapThis week saw the Federal Reserve hold rates steady, seeing a slightly improved and generally positive picture for the US economy noting "Near-term risks to the economic outlook have diminished". Many countries shared estimates of second quarter (April-May) GDP growth this week. The first estimates for US GDP for the second quarter of 2016 at 1.2% growth year-on-year, this is a similar rate of growth to the first quarter, but below what many expected. In the European Union, GDP growth of 1.6% year-on-year was also broadly consistent with the prior quarter. UK GDP was strong for the second quarter at 2.2% year-over-year, however did slow meaningfully in the month of May as the EU referendum drew closer at the end of May. Overall, it appears that developed economies continue to grow at a solid, if unspectacular, pace. Various markets in the US, including the S&P 500 and Dow Jones indices, have made new all-time highs this month. Though this can be encouraging for investors, it may actually matter less than you think. If you're more pessimistic or contrarian in nature and concerned that a new high may mean the markets are set for a fall, remember that historically the S&P 500 has actually performed slightly better in the 12 months after making a new high than during other periods. A new high isn't necessarily a permanent peak for the markets. For example, in the 1980-2000 period, the US market saw a series of increasing new highs over a span of two decades. Additionally, historically, approximately 40% of investor returns in US stocks have come from dividends. Thus, we should remember that price changes are important for returns but so too are the slow and steady accumulation of dividends, if history is any guide. Furthermore, academic research suggests that stock market valuation can be helpful in predicting longer term stock returns, but in our view, the presence or absence of new highs has less meaning for markets. Most major stock markets, with the exception of the US, are not above highs of 2015 at this point. So although there is focus on the US market, other markets and asset classes are at different points in their economic cycle, as is often the case across the global economy. All of which is to say that we see no reason to change course. Just as when the markets appeared concerned about Chinese growth last summer, commodity weakness this February, or Brexit just last month, and now the US markets up on what appears to be improving employment and benign inflation, we have conviction that our recommended investment portfolio remains robust for the longer term, whatever the future should bring. Notes: Disclaimer: Your Portfolio Update
Over the past month your portfolio was up 3.6%, and we have no recommendations at this time to improve it. Congratulations on maintaining one of the best portfolios among all our clients. We will, as always, continue monitoring your account and alerting you if there are actions to take (periodic rebalancing is required, etc). Ways To Improve Your Portfolio
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Saturday, July 30, 2016
Your portfolio up 3.6% over the last 30 days as US grows 1.2% in Q2
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