Strong economic performance, trade disputes and Federal Reserve statements combined to produce a volatile quarter.

Despite losing ground for much of the first two months, equity markets rallied in June to create positive returns for the quarter. Large-cap stocks in the S&P 500 index gained 4.3 percent in the second quarter, reaching a new all-time high. Stocks of smaller companies, represented by the S&P SmallCap 600 index, posted a smaller gain of 1.9 percent for the quarter.

International stock markets also had a strong quarter, with the MSCI Europe, Australasia and Far East (EAFE) index gaining 3.7 percent. Despite threatened escalations and de-escalations in the trade war, a more accommodative stance from the Fed helped to improve market sentiment.

Bonds posted an even better quarter than their big run up in Q1. The Barclays U.S. Aggregate Bond index gained 3.1 percent in the second quarter, benefiting from signals from the Fed that the benchmark interest rate may be headed down. Bonds are up 6.1 percent for the year to date.

The Financial Engines perspective.

The second quarter was marked by big shifts in investor sentiment, in part due to announcements from policy makers and the Federal Reserve. Markets move when there is new information about the future. The challenge is that such new information is inherently unpredictable. If it wasn’t, markets would have already reacted. But you don’t need to predict the future to benefit from the market. A disciplined, diversified strategy can yield strong results over the long run. So far this year, markets have delivered strong returns for investors willing to endure the bumpiness of the ride. Have questions? Financial Engines advisors are here to help.

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