Monthly Market Monitor - August 2012

Market Indices1AugustYear-to-Date
S&P 500+2.25%+13.51%
Russell 3000+2.50%+13.15%
MSCI EAFE+2.70%+7.38%
MSCI Emerging Markets-0.29%+5.92%
Barclays U.S. Aggregate Bond+0.07%+3.85%
Barclays Municipal+0.11%+5.43%
Barclays US Corporate High Yield+1.17%+10.59%
  1. Morningstar Direct (all performance percentages are total return based, which include
    reinvested dividend, interest

U.S. stocks ended on a high note in August as the Federal Reserve pledged to intervene, if needed, to safeguard the economic recovery, and as European officials made progress to tame the region's debt crisis. Delivering a highly anticipated August 31st speech at the Fed's annual central bank symposium in Jackson Hole, Wyoming, Federal Reserve Chairman Ben Bernanke said the painfully slow pace of employment growth is of "grave concern" and signaled a willingness to add further quantitative easing if conditions warrant. Amid hopes for a third round of new stimulus, the S&P 500 returned 2.3% in August, the third straight monthly advance for the benchmark equity index. On August 21st, the S&P 500 reached its highest intra-day level in four years, but slipped below the 1,426 milestone that day and fluctuated near the 1,400 level the remainder of the month. Crude oil rose 9.6% in August, its largest advance since October, while spot gold and silver prices rose 4.8% and 13.4% respectively.

Small-cap stocks outperformed large-cap last month, as the Russell 2000, a proxy for small-cap equities, returned 3.3% in August. Large-cap stocks have however, remained this year's top performer relative to small-cap on a year-to-date basis. The S&P 500 is up 13.5% versus 10.6% for the Russell 2000. Growth-oriented stocks once again beat their value counterparts as the Russell 1000 Growth Index returned 2.7% versus 2.2% for the Russell 1000 Value Index.

In U.S. sector performance, seven of the ten S&P 500 major market groups advanced on the month, with Technology (+5.1%) and Consumer Discretionary (+4.4%) the biggest winners. Utilities (-4.1%), Telecom (-2.5%) and Consumer Staples (-0.5%) underperformed. For the year, all ten sectors held onto gains. Telecom retained its leadership position, but its YTD return slipped to 21% in August from 24.1% in July. Technology likewise remains the second best sector performer so far this year, extending its YTD gain by over 5% on the month to 20.3%.

Overseas developed markets edged out the U.S. as the MSCI EAFE Index, representing 22 of the world's 24 developed markets, but excluding the U.S. and Canada, returned 2.7% in August. Emerging markets snapped a two-month winning streak as the MSCI Emerging Markets Index lost 0.3% in August. Losing 2.6%, China's Shanghai Composite finished lower for a fourth consecutive month, its longest monthly losing streak since August 2004. Hurt by slowing earnings growth and diminished prospects for easing from Beijing, the Shanghai Composite finished the month at 2,047, its lowest level since February 2009.

Consistent with an outlook for easing by the U.S. central bank, Treasury prices fell and yields rose last month. The yield on the benchmark 10-year Treasury increased by 10 basis points in August to 1.57%. Overall, Treasuries lost 0.1% last month, as measured by the Barclays US Government Bond Index. Returns on U.S. investment grade bonds barely registered positive last month, as the Barclays US Aggregate Bond Index returned 0.07%, following a 1.4% gain the prior month. Municipal bonds, as measured by the Barclays Municipals Index, managed to squeak out a small return of 0.11% in August, extending their YTD gains to 5.4%. Non-investment-grade corporate bond returns also slowed last month, as the Barclays US Corporate High Yield Index rose 1.2% in August, down from a 1.9% return the month prior. High yield corporate bonds still remain this year's best performing bond asset class.

This information is compiled by Cetera Financial Group. No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

All economic and performance information is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information.

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