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Monthly Market Monitor - August 2014 Recap

Market Indices1AugustYear-to-Date
S&P 5004.00%9.89%
Russell 30004.20%9.23%
MSCI EAFE-0.15%2.56%
MSCI Emerging Markets2.25%10.63%
Barclays US Aggregate Bond1.10%4.81%
Barclays Municipal1.21%7.47%
Barclays US Corporate High Yield1.59%5.70%



  • Following a July loss, the S&P 500 rebounded 4.9% from a two-month low on August 7th.
  • The Federal Reserve affirms accommodative policy, noting significant slack in labor markets.
  • U.S. Treasuries rallied as buyers avoided European sovereign debt yields at record lows.

Equities rebounded in August as investors welcomed improving economic conditions and strong corporate profit reports amid a growing belief that the Federal Reserve will continue to support growth, even as some policymakers signaled a desire to raise rates. A jump in business investment led government officials to upwardly revise their estimate of second quarter GDP growth from 4% to 4.2%. Rising optimism helped investors to overlook intensifying military incursions by ISIS forces in Iraq and Russia's entry into eastern Ukraine. The S&P 500, having its best monthly return since February, closed above 2,000 for the first time ever on August 26th, finishing the month at 2,003, a new all-time record high. Over $1 trillion was added to the value of global equities in August, reaching a record $66.2 trillion. The value of stocks worldwide stood at $63 trillion at the September 2007 peak prior to the financial crisis, and fell to as low at $25 trillion in March 2009.

Small-cap stocks outperformed large-caps as the Russell 2000, the 2,000 smallest companies within the Russell 3000 Index, rebounded 5% in August after a 6.1% loss in July. Mid-cap stocks, as measured by the Russell Mid Cap Index, gained 4.8% last month, extending 2014 gains to 10.6%. Growth stocks widened their lead over value as the Russell 1000 Growth Index rose 4.6% in August, whereas the Russell 1000 Value Index gained 3.7%. Year-to-date however, the Russell 1000 Value Index continued to outperform the Russell 1000 Growth Index (10.4% versus 9.5% respectively).

Nine of the ten major sector groups rallied in August, with Utilities (+5%), Healthcare (+4.9%) and Consumer Staples (+4.7%) gaining the most. Energy (+2.2%) rose the least, while Telecom (-1%) fell. All ten sectors are higher so far this year with Healthcare (+16.1%) and Utilities (+16.1%) leading the way, followed by Technology (+14.9%).

Overseas developed markets underperformed the U.S. last month as the MSCI EAFE Index fell fractionally. Europe's STOXX 600 (+2.1%) posted its first gain since May after the region's central bank signaled readiness to implement new stimulus, possibly a bond-buying program. Emerging markets, as measured by the MSCI Emerging Markets Index, rose 2.3% in August, finishing near a three-year high. Emerging markets underperformed the U.S. last month, but outperformed on a YTD basis.

Treasuries, as measured by the Barclays U.S. Government Bond Index, rallied 1% in August, lifting YTD gains to 3.5%. The yield on the 10-year U.S. T-Note fell 22 basis points during the month to 2.34%. U.S. investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, returned 1.1% in August, extending its YTD gains to 4.8%. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, rose 1.6%, boosting its YTD return to 5.7%. The Barclays Municipal Bond Index rose 1.2% last month and has gained 7.5% YTD.

  1. Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest)

This information is compiled by Cetera Investment Management.

About Cetera Investment Management
Cetera Investment Management LLC provides passive and actively managed portfolios across five traditional risk tolerance profiles to the clients of financial advisors, who are affiliated with its family of broker-dealers and registered investment advisers. Cetera Investment Management is part of Cetera Financial Group, Inc., which includes Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Financial Specialists LLC, and Cetera Investment Services LLC.

About Cetera Financial Group
Cetera Financial Group, Inc. is the cornerstone of the retail advice division of RCS Capital Corporation (RCS Capital) (NYSE: RCAP), which is focused on serving the needs of investors with best-in-class solutions.

Committed to using its collective knowledge and expertise in service to and for others, Cetera Financial Group is focused on the growth of its affiliated broker-dealers and financial professionals' businesses by giving them the industry and market insight, technology, resources and solutions they need to better focus on helping their clients pursue their financial goals. For more information, visit cetera.com.

No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision.

All economic and performance information is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.

Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards.

Affiliates and subsidiaries and/or officers and employees of Cetera Financial Group or Cetera firms may from time to time acquire, hold or sell a position in the securities mentioned herein.