US Quarterly Update Q2 2018
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I'm Kevin Barr, Head of SEI's Investment Management Unit. Over the next few minutes I will provide an overview of the global financial markets and our perspective on them.
Equity markets advanced in fits and starts during the second quarter, regaining some lost ground from earlier in the year. The rally stalled as trade war fears rose in the final weeks of June.
The S&P 500 ended the quarter up 3.4%, outpacing global equity markets. By contrast, the MSCI All-Country World Index, a proxy for global equity markets, gained just 0.53% for the quarter. From a sector standpoint, results were mixed. Energy was the top performer, followed by information technology, consumer discretionary, heatlhcare and utilities. Financials posted the largest decline, with telecommunicaton services, industrials and consumer staples also falling.
In this environment, SEI’s equity strategies were hampered by their value tilt. While technology-driven growth stocks continue to hold sway, we believe the fundamental appeal of value stocks is more attractive in the long run for prudent investors.
Fixed-income markets reflected the relatively favorable conditions in the U.S. during the second quarter. U.S. high yield bonds outpaced the rest of the fixed-income universe, followed by U.S. Treasury Inflation Protectd Securities and securitized sectors. Emerging-market debt tumbled, especially bonds denominated in local currencies. The fall can be traced to a rally in the U.S. dollar, growing trade pressures, and rising interest rates increasing borrowing costs in emerging-markets.
Looking ahead, the same risks that marked the second quarter remain front and center. Rising trade tensions and pending interest rate hikes by the Federal Reserve are notable threats to a bull market that is far closer to its end than its beginning.
Despite these challenges, the U.S. economy remains strong, corporate profits continue to grow, and stock valuations outside of the tech sector are reasonable. Accordingly, we believe the bull market should continue to advance, we plan to stay the course until we see a significant deterioration in economic and financial fundamentals.
In closing, I would like to remind you that there’s no time like the present to review your portfolio and make sure it is aligned with your goals.
On behalf of everyone at SEI, thank you, as always for your trust and confidence.
S&P 500 Index is an unmanaged, market-capitalization weighted index that consists of the 500 largest publicly traded U.S. companies and is considered representative of the broad U.S. stock market.
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