Monthly Market Monitor - August 2013 Recap

Market Indices1AugustYear-to-Date
S&P 500-2.90%+16.15%
Russell 3000-2.79%+16.95%
MSCI EAFE-1.31%+8.54%
MSCI Emerging Markets-1.68%-9.94%
Barclays US Aggregate Bond-0.51%-2.81%
Barclays Municipal-1.43%-4.92%
Barclays US Corporate High Yield-0.61%+2.71%

After July's solid gains, the S&P 500 fell in August, as investors grew concerned that the Federal Reserve may reduce the amount of its bond purchases as early as this month. Last month's decline in the S&P 500 was its worst pullback since May 2012. Stocks extended losses after President Obama said Syrian President Bashar al-Assad's use of chemical weapons against his own people was a global threat and the U.S is prepared to hold the Assad regime accountable. Investors are concerned that a U.S. led attack against Syria may spark a larger regional war. The VIX Volatility Index surged by over 26%, the most since May 2012, to a two-month high of 17.01. Despite the upheaval, August trading volume has been especially light with an average of around 5.5 billion shares changing hands each day, the second-slowest month in over five years.

Smaller-capitalized stocks slightly underperformed large-caps as the Russell 2000, a proxy for small-cap equities, fell 3.2% in August. Value stocks fell more than growth stocks as the Russell 1000 Value Index lost 3.8% while the Russell 1000 Growth Index fell 1.7%. On a year-to-date (YTD) basis however, value continues to outperform growth as the Russell 1000 Value Index remains up 17.5% versus 16.9% for the Russell 1000 Growth Index. Commodities, as measured by the S&P GSCI Index, outperformed both stocks and bonds in August, gaining 3.4% and turned positive for the year, up 2.6%. Gold futures rallied 5.3% last month, trimming its YTD loss to 16.7%, and West Texas Intermediate (WTI) crude oil futures gained for a third straight month, jumping 3.3% in August.

All ten major sector groups ended negative last month. Financials (-5%), Utilities (-5%) and Consumer Staples (-4.4%) fell the most, while Technology (-0.5%) and Materials (-0.02%) fell the least. For the year, seven of the ten major S&P 500 sectors continue to post double-digit gains, led by Healthcare (+24.5%), Consumer Discretionary (+22.5%) and Financials (+19.6%). Telecom has gained the least so far this year, up just 6.2%.

Overseas developed markets outperformed the U.S. last month as the MSCI EAFE Index fell by 1.3%. Emerging markets, as measured by the MSCI Emerging Markets Index, fell 1.7% in August after climbing 1.1% in July. The MSCI Emerging Market Index extended its YTD loss to 9.9%.

Treasuries, as measured by the Barclays U.S. Government Bond Index, declined by 0.5% on the month, extending its YTD loss to 2.6%. The yield on 10-year U.S. Treasury notes increased by 18 basis points in August to end the month at 2.78%. U.S. investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, also fell by 0.5% last month, extending its YTD loss to 2.8%. Municipal bonds, as measured by the Barclays Municipals Index, sank 1.4% in August and extended its YTD decline to 4.9%. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, fell by 0.6%, trimming its YTD gain to 2.7%.

  1. Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest)

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