As Summer Begins, Markets Search for Direction

Last week saw more mixed data about the state of the U.S. economy. While initial jobless claims and continuing claims were worse than investors anticipated, existing home sales and housing prices beat expectations.

International economic data was better than expected, overall, with strong results in European consumer confidence, Japanese industrial activity and Russian retail sales.

The top-performing sector in the U.S. equity market was health care, as investors breathed a sigh of relief after proposed health care regulation was less onerous than originally anticipated. The biotechnology sector performed especially well on hopes that drug industry regulations could be eased. In contrast, financial services performed poorly for the week as interest rates moderated. Energy also underperformed as oil prices continued their downward slide.

Overseas, Chinese equities were the top performers in the wake of the announcement that Chinese A-shares will be included into MSCI’s indices. The move is expected to add billions of dollars into China’s stock market.

In the fixed-income markets, bonds with the longest durations outperformed as yields fell on lower oil prices and concerns about the economy. Long-duration bonds are most sensitive to interest rate movements. Emerging markets bonds and high-yield corporate credits underperformed for the week, as fixed-income investors became more risk averse.

GAIN: Active Asset Allocation

Stocks were generally flat this week, with U.S. stocks outperforming international equity markets overall. Emerging markets outperformed their developed international peers for the week.

In the U.S., growth outpaced value once again after losing ground during the previous two weeks. Technology stocks, which had sold off recently, boosted growth stocks. Meanwhile, the energy and financial services sectors lagged, dragging down broad-based value indices.

Longer duration bonds rallied this week as interest rates moved lower along with oil prices. Strong demand for U.S. bonds from overseas investors continues to put a cap on longer rates.   

PROTECT: Risk Assist

Volatility was muted last week, with the CBOE Volatility Index (VIX) at just above 10—near its all-time low. Summer is typically a low-volume time of year, which can lead to increased equity market risk. But so far this year, markets are taking any bad news in stride.

The Risk Assist models remain fully invested and globally diversified as they seek to continue capturing gains in the global equity markets.

SPEND: Real Spend

With both equity and fixed-income markets relatively flat once again, it’s a good time to note that Real Spend is designed to help clients reach their goals regardless of whether markets are positive in the near- to medium-term.

For example, the spending reserves across all Real Spend models remain at maximum capacity and are invested in assets that seek stability in all market environments. These assets seek to provide the liquidity needed to support near-term distributions.

In addition, Real Spend models are designed to pursue yield for investors in retirement. This can help to avoid some of the worst volatility when one specific sector of the market falls. Recently, for example, the price of oil has plummeted—which in turn has hurt master limited partnerships, a common investment option for yield-hungry investors. MLPs are down over 10% so far this year.

You are now leaving this website to go to

Connect product to planning with the Horizon technology suite. Goals-based strategies, cutting edge software.

Explore mutual funds managed by Horizon Investments.