Our second quarter update comes with cautious optimism about the outlook for the US economy and the markets. Continued strengthening in the US economy paired with a rebound in energy prices have led the markets to new highs despite political uncertainty across the globe. Interest rates remained unchanged in the United States, while Japanese and European banks began to feel the effects of negative interest rates. While uncertainty related to the election and interest rates could cause volatility in the markets over the next quarter, we expect the global economy to continue to strengthen gradually.
Political uncertainty could weigh on the markets in the coming quarter, but as with the recent Brexit, this will offer buying opportunities for long term investors. The odds of a recession in the US economy remain low. Wages are steadily increasing and the labor market continues to tighten, which are both good signs for the economy.
Dividend yielding stocks have performed well so far this year. Utilities, telecommunications and companies that manufacture consumer staples are doing well. Energy stocks have rebounded strongly this year while some cyclical market sectors like technology continue to lag. Investors continue to favor dividend-paying stocks from large companies, which has helped push the market to new highs.
Over the short term, markets can be very unpredictable as we have seen with the recent Brexit event. However, the long term trend continues to be upward, and we look at such events as great opportunities to deploy cash in to the market. You should remember that a large portion of the market’s gains come in very short periods. If you miss those few days of advances you will significantly under-perform the long term averages. At CPS Investment Advisors, remain committed to our conservative long-term approach to investing.
We appreciate your confidence in us and we are grateful for the opportunity to serve you and your family. As always, if you have any questions, please reach out to us at any time.