By Greg Naylor  June was an eventful month in terms of economic news, with a press conference by Ben Bernanke on June 19 sparking a sell-off in stocks and bonds. I agree with PIMCO’s Bill Gross, who believes the market misinterpreted Mr. Bernanke’s comments. More on that later.  For now, here is a re-cap of June by the numbers:
Stocks & Bonds
Most assets saw price declines in reaction to Mr. Bernanke’s comments. Riskier assets saw the biggest declines, as international stocks continue to underperform U.S. stocks. Inflation remains tame.
| S&P 500 Total Return | MSCI EAFE | BarclaysAggregateBond | Unadjusted CPI | |
| June | -1.34% | -3.72% | -1.55% | 0.18% |
| May | 2.34% | -2.93% | -1.78% | -0.10% |
| YTD 2013 | 13.82% | 2.17% | -2.45% | 1.18% |
Commodities & Currencies
NYMEX crude gained 4.72% in June, up to $96.56 per barrel. Gold fell again, by 12.15% to a close of $1,223.70 per ounce.  For the most part, commodities saw price declines as markets worried about the Fed removing stimulus. The dollar index fell ever-so-slightly in June, by 0.29%.
Economy
The Labor Department reported that the unemployment rate ticked up slightly, from 7.5% in April to 7.6% in May, although the economy added 175,000 jobs. The Institute for Supply Management reported that the manufacturing PMI in May rose to 50.9, indicating a slight expansion in the manufacturing sector. Previous months had indicated a slight contraction.
The National Association of Realtors (NAR) reported that the annual rate of existing-home sales in May increased by 12.9% from May 2012. National median prices rose from the prior year by 15.4% to $208,000. Foreclosures and short-sales, as a percentage of overall sales, remained unchanged from April at 18%. This is the lowest share since the NAR began keeping this statistic in October 2008.
Summary
When the crisis of 2008 occurred, many feared that the response of stimulus from both the federal government and the Federal Reserve would create tremendous inflation and devalue the dollar. Investment strategies based on this fear have produced mixed results, as the dollar has actually strengthened, and inflation is running well below the Fed’s tame target of 2%. The ‘recovery’ continues to create far fewer jobs than previous recoveries have created. We have barely begun to feel the effects of the sequester which started not even 5 months ago, and the recent uptick in mortgage rates could hamper the housing recovery, one of the few bright spots in the domestic economy.
I continue to be more concerned about deflation than I am about inflation. In a deflationary environment, some companies will be better able to protect profits better than others, so I believe that careful and diversified investment decisions are as important as they have ever been.
This material was prepared by Greg Naylor, and does not necessarily represent the views of Woodbury Financial or its affiliates. This information should not be construed as investment, tax or legal advice and may not be relied upon for the purpose of avoiding any Federal tax liability. This is not a solicitation or recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The S&P500, MSCI EAFE and Barclays Aggregate Bond Index are indexes. It is not possible to invest directly in an index.  Investing involves risks and investors may incur a profit or a loss. Past performance is not an indication of future results.
Data Sources:
- www.standardandpoors.com – S&P 500 information
- www.msci.com – MSCI EAFE information
- www.barcap.com – Barclays Aggregate Bond information
- www.bloomberg.com – U.S. Dollar & commodities performance
- www.realtor.org – Housing market data
- www.bea.gov – GDP numbers
- www.bls.gov – CPI and unemployment numbers
- www.commerce.gov – Consumer spending data
- www.napm.org – PMI numbers
- www.bigcharts.com – NYMEX crude prices, gold and other commodities
- https://www.imes.boj.or.jp/research/papers/english/12-E-03.pdf – Deflation and aging study
About Greg Naylor: Greg is a partner and co-founder of Fiat Wealth Management, an independent financial advisory firm in Long Lake, Minnesota. He has been investing for over 7 years and enjoys sports, reading, singing, and spending time with family. Greg is a 2004 graduate of the University of Minnesota and lives in South Minneapolis with his wife Kat.
Twitter:Â @seeitmarket
