Markets end higher, but volatility continues.

What happened.

Markets rose around the world in June. The S&P 500, an index of U.S. large-cap stocks, was up by 1.99 per cent. Small-caps were up more, rising by 3.74 percent (S&P 600). Looking abroad, we see that international stocks were up by 3.41 percent (MSCI EAFE Index). And bonds also had a good month too, with Bloomberg Barclays Aggregate Bond Index up 0.63 percent. Our simple measure of volatility in the stock market shows that June was a volatile month, with S&P 500 moving by +/- one percent on 11 of the 22 trading days of the month. This was also the end of the second quarter of the year, which followed a steep fall in the first quarter. The S&P 500 rose by 20.54% over the past three months, making it the best quarterly return since the fourth quarter of 1998.

Why it happened.

Uncertainty about the economic impact of the coronavirus pandemic drove markets in June. Market participants, trying to figure out how the coronavirus will impact companies’ performance, reacted strongly to good and bad news. As a result, markets experienced repeated ups and downs.
Early in the month, the unemployment rate was reported and, instead of rising substantially as expected, actually fell slightly. In response, the S&P 500 rose by 2.6 percent on June 5th. But on the 11th the S&P 500 fell by 5.9 percent after news of spikes in coronavirus infection rates and Federal Reserve Chairman Jerome Powell predicting a slow economic recovery. Then there was positive news on the 16th as retail sales grew by 18 percent, double what was predicted, sending markets back up. Another fall in markets came on the 24th as the International Monetary Fund said that the recession was worse than it had expected. There was also news of spikes in infections, leading multiple states to pause or backtrack on their reopening plans. Towards the end of the month, markets rose once more as pending home sales and the consumer confidence score beat expectations. After all these ups and downs, the S&P 500 closed up for the month.

What this means for you.

At Financial Engines, we build personalized portfolios that reflect your risk preferences and goals. Your portfolio is likely to have risen in June, and slightly more so if you have a higher stock allocation. But, as we continue to see market volatility, it is important that you are comfortable with your portfolio’s risk level. To do so, log into your account and look at the impact of changing your risk preference. Or call one of our advisors to help determine the level of risk that is right for you.

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