The Fed ponders interest rate hike timing


The U.S. economy continued to perform at a modest pace during July and capital markets held up in the face of global worries about Greece, China, emerging markets and commodity prices.

U.S. inflationary pressures continue to be muted, but employment is looking good.

In my opinion, however, slow wage growth may cause the “data-dependent” US Federal Reserve to re-think the start of its tightening cycle thought to begin later this year.

 

Janet Yellen

 

Choppy Markets

Volatility was again evident during July as global events triggered both despair and relief, while the S&P 500 Index trended close to its all-time high during the month.

The S&P 500 finished July with an uptrend ending a volatile month up 2.1%.  

There continued to be significant dispersion of returns amongst industry sectors.

Emerging Market Slump

Commodity-sensitive sectors such as materials and energy struggled with weak returns. In contrast, the utilities sector rallied.

Broad emerging markets including China, Asia and Latin America were much weaker during the month. The broad MSCI Emerging Market Index struggled with its third straight month of negative returns.

Broad bonds were range-bound finishing up by slightly in July, while energy-related MLPs and high yield bonds lost ground.

 

Photo Credit: Day Donaldson via Flickr Creative Commons

Author profile

Henry Ma, Julex Capital Management
Henry Ma, Julex Capital Management
We are Julex Capital Management. Our company offers rule-based total return strategies that strive to deliver consistent returns with low volatility and drawdowns in both bull and bear markets. Our team uses a systematic process that helps to remove human biases and emotion from the investment process. Julex is managed by industry veterans with strong academic backgrounds and practical experience in portfolio management, asset allocation and risk management. Our strategies offered through Covestor are overseen by Julex Founder Dr. Henry Ma, CFA, who uses quantitative techniques to support his investment and risk management decisions. Henry is a former Portfolio Manager at Geode Capital/Fidelity Investments, and the former Director of Quantitative Research at Loomis, Sayles & Co and Fortis Investments.