In the U.S., second-quarter earnings season ramped up last week, with mixed results. Companies in the healthcare and technology sectors surprised investors by beating quarterly earnings estimates, while other sectors such as consumer staples, energy and materials posted disappointing results. On balance, equity investors remained hopeful and pushed stocks modestly higher. The S&P 500 built on its recent gains, up 0.6% for the week.

Globally, stocks gained 0.1% (as measured by the S&P Global Ex-U.S. BMI). European economic expectations weakened in July to their lowest levels since 2012, according to a key survey by ZEW, a German organization. The decline was driven largely by uncertainty in the wake of the UK’s Brexit vote. Meanwhile, the European Central Bank held interest rates steady while stating it is ready and able to act if needed. The ECB pointed out that the risk to Euro-zone economic growth is tilted to the downside and stated that its 80-billion-euro-per-month asset-purchase program is expected to remain in place for the foreseeable future.

GAIN: Active Asset Allocation

Stocks traded in a relatively narrow range during the week, with moves to the upside and downside being driven largely by corporate earnings announcements. Overall, domestic equities fared better than international shares. Additionally, the dollar rallied due to signs of economic strength in the U.S., while oil prices fell on concerns of excess supply.

We remain generally bullish on equities based on our analysis, but expect to see some volatility and “choppiness” as more companies report their earnings results for the second quarter.

Fixed-income markets rebounded somewhat last week. We continue to favor corporate fixed-income securities issued by companies with strong balance sheets, which we see as offering potential safety against future volatility.

PROTECT: Risk Assist

Financial markets were relatively calm last week, with no significant moves to the upside or downside. The CBOE Volatility Index (VIX), which measures expected future levels of volatility, dropped below 12 for the first time since mid-2014. Meanwhile, actual realized volatility in the S&P 500 (a backwards-looking measure of volatility) fell to 6. In that environment, the Risk Assist portfolios remained unhedged and positioned to fully participate in the markets.

SPEND: Real Spend

Relatively small gains in equities were tempered by relatively small losses in bonds during the week. As bond yields remain at low levels, we continue to favor dividend-paying stocks and preferred stocks as part of Real Spend’s strategy to provide relatively attractive yields to income-focused investors.