GKV Capital Management is a fee-only registered advisory firm in operation since 1975. We manage separate accounts for families, charities and companies. As an independent portfolio management firm making direct investments on our clients’ behalf, GKV Capital has the flexibility and expertise to respond to the changing investment environment to reduce risk and grow wealth.
Stock Market Commentary for June 2014
Despite weaker than expected economic growth in the first half of the year, the major stock indexes recorded respectable gains through the end of June. Growth rebounded in the second quarter after cold weather dramatically slowed economic activity earlier in the year. At the half way mark for 2014, the Dow Jones Industrial average is the weakest with a 1.5% gain. The Nasdaq Composite finished the second quarter up 5.5% and the broad S&P 500 recorded a 6.1% gain. While the headline numbers are positive, the year has been more challenging than the percentage gains would suggest.
The much vaunted annual summer swoon for the market failed to materialize this year. In fact, the strongest weeks of the first half of the year came at the end of June. Many pundits have been calling for a correction after the big returns in 2013. Instead of a general market correction, there have been “rolling corrections” in segments of the market. The leading sectors in 2013, namely biotech and some areas of technology, declined more than 20% and have subsequently bounced back. The volatility in many of the high price-to-earnings, more speculative stocks, has pushed some investors to the sidelines, us included. So far the move to a more conservative stance has not been the right call in 2014 as evidenced by the relatively weak performance of the Dow Jones Industrial Average versus the S&P 500 and Nasdaq Composite.
First quarter GDP in the U.S. declined a far greater than expected -2.9% attributed largely to weather which negatively impacted personal spending and international trade. Economists are forecasting a rebound with a 3.0% forecast for growth in the second quarter and 1.5% growth for the full year. Even with a rebound after the first quarter, this forecast represents a disappointment relative to the earlier 2.6% expectation for 2014. The “just around the corner” post-recession acceleration has now been postponed to 2015 with a forecast for 2.9% GDP growth. The weakness in the equity markets for the first quarter can be attributed to the lackluster GDP growth. The expectation that an acceleration is just around the quarter is getting tired.
More Quarter Reviews