- U.S. stock indices rallied in June, based on upbeat economic news and corporate profit growth. The Dow Jones Industrial Average gained 1.6%, the S&P 500 was up 0.5%, and the Nasdaq Composite dropped 2.4%. International equity markets were slightly higher. The MSCI Europe Australia Far East Index (EAFE) dropped 0.4% and the MSCI Emerging Markets Index was up 0.5%.
- Volatility in the U.S. stock market is near an all-time low even as corporate profits have recovered from a year ago. Some investors are worried that the pace of hikes in the Federal Funds rate could further slow an already sub-par economic recovery. Risks to the markets include a policy error by the Federal Reserve, a global trade war, an economic slowdown in China and a military engagement.
- The Federal Reserve raised the Federal Funds rate by 25 basis points (100 basis points = 1 percent) in June. This widely expected move was the second hike this year and the third since December. The key will be whether economic data and corporate profits in the months ahead justify higher borrowing costs.
* This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.
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