Another step forward in the stock markets in June rewarded steady investors. The average return of the DOW (DJI) and the S&P 500 indices is 1.2% for the month. Bonds closed the month slightly higher. Strong market sectors this month were health care, consumer cyclicals, and IT, with most other sectors lagging.
A risk cluster is an interdependence of loosely related market sectors that rise and fall together in certain circumstances. The clustering reduces diversity and increases risk even with multiple investments. The housing, banking, and commodities sectors form a risk cluster in today’s market. All three sectors dropped together in June.
Domestic GDP continues bounding back as jobless claims drop. Low interest rates push savers, desperate for returns, into stocks. Stock prices push up in response to the demand. Interest rates are a key lever in this economy with a rate ease by the Fed being a positive signal for stocks. A spike in inflation is expected from this economy, as well as a rapid return to current levels. There is comfort in this economy.
By the end of June annual poppies dominate our garden. This year I discovered another of their secrets. Some not only sprouted but grew to nearly full height and produced multiple blooms growing in a crevice without soil or significant water, in full sun. Planted by a breeze and a snacking chipmunk, (I found the chewed pod last summer on the patio.) the seeds required only winter chill and spring dampness and lots of sun in order to bloom. The resourcefulness of a wildflower, yes, with essential conditions met.