Geneva provides its second quarter market overview for 2015. They discuss geopolitical risks effect on volatility, global economic positioning and their optimism for the future. “Market Overview
U.S. equities generated modest gains in the second quarter. Improving economic data, continued easy global monetary policy and increased merger and acquisition activity combined to help sustain higher equity prices.Geopolitical risks, however, now including those in Greece and China, caused increased market volatility.
The tenuous financial situation in Greece could be nearing a resolution. Europe has had years to prepare for a possible Greek Eurozone exit, and global economies generally are much healthier compared to five years ago. Making up less than 1% of global GDP, risks associated with Greece appear to be contained. Preventing instability from spreading to other southern European economies could be the challenge.
The situation in China is different. China’s economy is undergoing structural changes as it evolves from export and investment driven growth to include more consumption activity. That fundamental shift, combined with the recent weakness in China’s equity markets, created increased concern for future growth of the world’s second largest economy.
Despite these concerns, the global economy today is better positioned to handle these potential issues than it has been in years. We believe the markets and the global economic picture will continue to improve.
Growth Strategies
Growth stocks once again outperformed value stocks in the second quarter, which benefited the Geneva growth strategies. The market rewarded high quality companies with impressive earnings growth, especially those in the health care and consumer discretionary sectors.
The strategies have large allocations to the consumer discretionary sector. Low energy prices and declining unemployment continue to improve consumer confidence and we do not expect either of these conditions to change dramatically in the near term.
High quality growth companies remain attractive relative to their own historical valuations and to the broader equity market. We are optimistic for the strategies as we look ahead.
Equity Income Strategies
Our equity income strategies invest in high quality companies with strong and growing dividends. At this stage in the market cycle, we believe broad stock market returns could moderate. Historically, dividend growers have outperformed the S&P 500 in these conditions.
Utility stocks continued to decline in the second quarter. Expectation of rising interest rates has appeared to reverse the yield‐chasing performance that has characterized the sector for the past few years. Valuations within the sector remain relatively high and we would not be surprised to see further weakness.
Our strategies are well positioned for a potential rising interest rate environment with limited exposure to REITs, utillies and MLPs relative to our historical averages." Download the full report below.
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