2nd Quarter Market Recap
The second quarter of 2015 is behind us. Let’s take a look at how the markets performed during the period.
As winter weather finally lost its chokehold on the U.S. economy, investors grew increasingly comfortable with the Federal Reserve's slow-and-steady approach to determine when to raise short-term interest rates. Historic closes were reached by the large-cap Dow (18351) and S&P 500 (2134), while the small-cap Nasdaq (5164) and Russell 2000 (1296) also reached all-time highs during the second quarter. Unfortunately, those gains were all but wiped out as the financial crisis in Greece affected markets domestically and around the world. Both the Dow and S&P 500 lost 0.88 points and 0.23 points respectively compared to the end of the first quarter. The Nasdaq and Russell 2000 still finished ahead of last quarter, but not by much.
U.S. Treasury prices declined from the first quarter, with corresponding yields making their biggest gains since 2013. The decrease in bond prices was largely attributable to increased consumer spending coupled with investor confidence in the equity markets, which encouraged more money shifting from bonds to equities. Lower unemployment rates along with a slowly improving economy are additional factors leading to lower prices/higher yields.
Oil prices grew to $59 a barrel during the quarter, pushing gas prices higher. Gold, meanwhile, also felt the effects of the global economy, finishing the quarter down at roughly $1,172 an ounce.
- Globally, economic woes in Greece, China, and Puerto Rico serve to illustrate just how fragile the economy is in other parts of the world. The worsening financial crisis in Greece has caused markets to tumble across the globe. The declines came as Greece shut down its banking system and its central bank initiated actions to institute controls aimed at stopping money from leaving the country, which might otherwise cause banks to collapse. Cash withdrawals are limited to 60 euros ($67) per day, causing long lines at ATMs. With Greece missing its scheduled debt repayment, the odds increased that Greece might exit the eurozone, all of which has prompted the markets to fall. A "no" vote following the voter referendum on July 5th means an uncertain financial future for Greece.
- China, which has been experiencing favorable market returns for several years, saw its stocks sink the most in five years after reports from several high profile analysts among other analysts warned that valuations had climbed too far, according to Bloomberg. In response to the selloff in Chinese stocks, the People's Bank of China (the country's central bank) cut both its benchmark interest rates and the amount of reserves certain banks are required to hold. All this as the country continues efforts to promote an economy driven by private business and consumer spending rather than infrastructure (government-sponsored) outlays and exports.
- Puerto Rico, with its economy ailing, has indicated that it cannot pay its debts. Puerto Rican bond holders are looking at significant losses, as the central government may run out of cash within a month, according to the Wall Street Journal. However, at the time of this writing, Puerto Rico was close to a deal with its creditors to avoid default.
- In spite of the latest financial upheaval in Europe, the domestic economy showed continued signs of improving in the second quarter, following a similar trend begun at the end of the first quarter. Nevertheless, there are still several sectors lagging as described by Federal Reserve Chair Janet Yellen in her June update. Some of the factors that have led the Federal Open Market Committee to refrain from raising interest rates include lagging exports (primarily due to the strength of the dollar), continued weakness in the labor market, and subdued wage growth. In addition, if the global economic tumult hits the United States, the Fed could further delay an interest rate hike.
All eyes will continue to focus on the financial crisis in Greece. Will the initial negative impact on the markets in response to Greece's shuttered banks, repayment default, and the prospect of the country's exit from the eurozone continue to drive markets further into negative territory? Will the Federal Reserve provide more information on the timing of the anticipated interest rate hike? Market participants await answers to these and other questions as the second half of the year unfolds.
Notes: The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. Market indexes listed are unmanaged and are not available for direct investment.
Portions of this market recap were provided by Forefield Financial Communications.
The performance quoted represents past performance, which does not guarantee future results. This summary represents the views of the portfolio manager as of May 31, 2015. Those views may change, and the Funds disclaim any obligation to advise investors of such changes. The Azzad Funds are self-distributed and available by prospectus only. A free copy of the prospectus, which contains information about the Funds’ risks, fees, and objectives, and other important information, is available at www.azzadfunds.com or by calling 888.350.3369. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks measuring the performance of those Russell mid-cap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index. The Dow Jones Sukuk Index is designed to track the performance of global Islamic fixed-income securities, also known as Sukuk. The index includes U.S. dollar-denominated, investment-grade Sukuk that have been screened for Shari’ah compliance.