July 2015 Monthly Strategy Dashboard

The end of the first half and the start to the second half of this year have thus far served to remind investors that in practice “no country is an island” in a globalized universe.

Just as the second quarter came to a close, prospects that Greece might default on its debt suddenly loomed over the global markets, captured the focus of market participants and observers and added to already elevated concerns about a precipitous stock market decline in China’s principal mainland markets which had begun on June 12th and by July 8th had driven the Shanghai Composite¹ and the Shenzhen Composite² lower by 32.1% and 40% respectively.

The size of the Greek economy (ranked 47th at $237 billion by the World Bank) didn’t weigh in as much with investors as the collateral damage it might do to the status of the Eurozone (at $13.4 trillion in member aggregate GDP, ranking it second in economic size only to the US) should a Greek default and resistance to austerity and fiscal reform set a dangerous precedent via a “Grexit” that could erode investor confidence in the integrity and future of the Eurozone.

The days that have ensued since the start of July should remind investors’ collective mind share that in today’s digitalized and globalized market place the concept of regional and national market decoupling appears once again since the crisis of 2008 doomed to be debunked.

The intermittent rallies in global equity markets on news of progress made in Europe, Greece and in China over recent days show no small amount of evidence of the resilience of the world markets and the capabilities of crisis-experienced governmental agencies and monetary policy makers around the world to respond to real time situations that can develop.

As the eye of the storm in Europe and in China appear to have passed by mid-July, uncertainty still remains and is likely to linger until the ultimate outcomes of what is taking place in those respective locales is learned.

That said, we believe that the environment remains conducive for economic growth to reassert its visibility, lift economies outside of the US into improved recoveries and add to the sustainability of the US economic expansion that is in progress.

We continue to believe that risk and opportunity lie in proximity on the landscape with opportunity supported by cyclical trends and improving fundamentals likely to overpower risk as the year moves ahead.

Stay tuned.

¹ The Shanghai Stock Exchange Composite Index is a capitalization-weighted index of the daily price performance of all A- and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100.

² The Shenzhen Stock Exchange Composite Index is a market-capitalization-weighted index of the daily price performance of all A- and B-shares listed on the Shenzhen Stock Exchange. The index was developed on April 3, 1991 with a base value of 100.

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