Benchmarks have tackled macroeconomic concerns from the other
side of the pool to snatch significant gains for the first half of
2014. On the domestic front, benchmarks overcame headwinds
including harsh winter weather, drop in first-quarter GDP and
decline in Treasury yields to close in the green. The Dow Jones
Industrial Average (DJI), S&P 500 (INX) and NASDAQ Composite
(IXIC) boast gains of 1.5%, 6.1% and 5.5%, respectively, for the
first half of 2014. The S&P 500 has hit record highs on 22
occasions so far this year. Also, it has the best lead over the Dow
since 2009 and the seventh best lead since 1929.
The S&P 500 and the Nasdaq registered their sixth-straight
quarter of gains. Separately, the S&P 500 marked its biggest
second-quarter gain since 2009. The blue-chip index too recorded
gains in five out of the last six quarters.
Synopsys of Monthly Performance
Following a robust Bull Run in 2013, benchmarks began 2014 on a
sour note. The beginning of 2014 witnessed three consecutive days
of losses that led the S&P 500 to its worst start to a year
since 2005. The blue-chip index plunged 5.3%, S&P 500 was down
3.6% and Nasdaq ended the month with 1.7% decline. This was the
blue-chip index' worst start since 2009.
The Dow and S&P 500 rose 4% and 4.3%, respectively. The Dow
recorded its largest monthly percentage gain since January 2013.
The Nasdaq increased 5% for the month, its biggest monthly gain
since September 2013.
The Dow and S&P 500 rose 0.8% and 0.7%, respectively. In
contrast, the Nasdaq lost 2.5%, its worst performance since Oct
The Dow and S&P gained 0.8% and 0.6%, respectively, for the
month. The tech-heavy Nasdaq slipped 0.2%.
The S&P 500, the Dow and the Nasdaq gained 2.1%, 0.8% and 3.1%,
respectively. May's gains helped the Nasdaq and the blue-chip index
turn positive for the year.
The S&P 500 registered its fifth successive month of gains. The
index gained 1.9% over the month. The Dow and the Nasdaq also
gained 0.7% and 3.9%, respectively, over the month.
Political clashes were the major global headlines during this
period, while Chinese economic data also guided our benchmarks.
Separately, ECB's monetary stimulus actions kept the markets
moving. On the home front, the Fed's decision and hints regarding
the low interest rate environment and trimming of the bond buyback
plan were major movers. Economic data was mostly mixed, but the GDP
numbers were largely on the negative side.
Investors were jittery at the start of the year owing to the second
$10 billion cut to the economic stimulus plan. This was among the
primary reasons for the benchmarks' sharp decline in January.
However, assurances by the Fed Chairwoman Janet Yellen about
economic recovery calmed the nerves thereafter. In Yellen's first
testimony before lawmakers after taking the Fed chair, she
emphasized that interest rates would continue to be low. Later in
February, Janet Yellen blamed the harsh winter climate for the
weakness in the economy.
In June, markets were positively impacted after the Federal Open
Market Committee (FOMC) allayed fears of near-term rate hikes, but
tweaked target interest rate forecasts. Further, the Fed reduced
its monthly asset repurchase plan. The asset repurchase plan
currently stands at $35 billion a month.
Yellen also provided an impetus to the markets with the comment
that the central bank will consider a "wide range of indicators" on
the labor market for decisions on rate hikes. She also said:
"Economic activity is rebounding in the current quarter and will
continue to expand at a moderate pace thereafter".
Impact of Global Issues
Rising political tension between Russia and the West over Crimea
severely affected markets on certain days mostly during
March-April. The Crimean crisis had dragged the benchmarks down to
their worst fall in over five weeks on March 14.
Russia ignored all warnings from the West to take ownership of the
Crimean region. The U.S. President penalized Moscow by freezing
personal assets and banning travels for a number of Putin's allies,
as well as forbidding several Russian companies from doing business
with U.S. firms. (Read:
Russia Mutual Funds to Watch on Ukraine Crisis
Economic data from China were largely on the negative side from the
beginning of this year. In January, the HSBC preliminary survey
showed a contraction in China's manufacturing sector. In March,
larger-than-expected decline in Chinese exports of 18.1% year over
year raised concerns of a slowdown in the world's second-largest
Recently, HSBC preliminary manufacturing PMI increased to a seven
month high of 50.8 in June. The dismal economic readings had
prompted the Chinese authorities to come out with a mini-stimulus
package a few months back and the positive effects may have
started. China's government authorities have set a 7.5% GDP growth
target, while growth in Q1 came short of that target.
Announcement of stimulus measures by the ECB were welcomed by
investors. Benchmarks notched record highs early in June after ECB
reduced its key interest rates. The refinancing rate was lowered to
0.15% from 0.25% and the marginal lending facility rate was reduced
to 0.40% from 0.75%. ECB also cut the deposit rates to -0.10%;
thereby becoming the first central bank to have a negative rate.
Additionally, ECB deployed a series of targeted long term
refinancing operations in an effort to boost bank lending to the
non-financial private sector in the Eurozone.
The latest concern for the markets has been the sectarian clashes
in Iraq. Markets have been negatively affected on certain days in
June as investors are concerned about oil supply disruption from
Iraq. The al-Qaeda connected Sunni militant group - the Islamic
State in Iraq and Syria (ISIS) - has captured key towns in Iraq,
where Iraq's biggest oil refinery is located.
However, the energy sector has been the only gainer from this, as
shot up. Oil prices rose to their highest level in nearly nine
months during early June. (Read:
3 Safe Energy Fund Bets amid Iraq Unrest
The Energy Select Sector SPDR (ETF) gained 5.0% last month while
the broader markets remained jittery.
U.S. Economic Data
Nonfarm Payroll Data
A surprise weaker-than-expected US jobs report left investors
worried about betting big on equities in January. It was reported
in January that nonfarm payroll employment moved up 74,000 in
December. This was significantly below the consensus estimate of a
gain of 192,000.
However, the nonfarm payroll data has been positive thereafter;
suggesting improving labor conditions this year.
According to the U.S. Bureau of Labor Statistics, total nonfarm
payroll employment had risen to 113,000 in January. This was short
of the consensus estimate of a jump to 189,000. However,
unemployment rate had fallen to 6.6%, a five-year low. The
lower-than-expected job additions did not affect markets much as
investors focused on the drop in unemployment rate.
Nonfarm payroll employment had jumped to 175,000 in February from
129,000 in January. The rise came despite the harsh winter weather.
Total nonfarm payroll employment had risen to 192,000 in March.
Benchmarks had opened higher on May 2 after the total nonfarm
payroll employment was reported to have jumped to 288,000 in April.
The economy added the most number of jobs in April since Jan 2012.
Encouraging May's nonfarm payroll report had also led benchmarks to
record highs on Jun 6. Total nonfarm payroll employment jumped
217,000 in May, more than the consensus estimate of a rise by
213,000. Unemployment rate stayed at 6.3% in May.
The third and final data for real gross domestic product ("GDP")
shows that the U.S. economy is faltering. The Bureau of Economic
Analysis reported GDP shrunk 2.9% in the first quarter of 2014
contrary to the second estimate of 1% decline and the first
estimate of 0.1% increase. This is the worst performance in five
years. In the fourth quarter of 2013, real GDP had advanced 2.6%.
However, investors ignored the biggest contraction of the U.S.
economy in the first quarter since early 2009 as the report did not
impact benchmarks negatively the following day. (Read:
U.S. GDP Decline: Real or Just a Mirage of
3 Best Funds of First Half 2014
Here we will suggest funds that feature among the top gainers so
far this year. They also carry
Zacks Mutual Fund Rank #1 (Strong Buy)
. Remember, the goal of the Zacks Mutual Fund Rank is to guide
investors to identify potential winners and losers. Unlike most of
the fund-rating systems, the Zacks Mutual Fund Rank is not just
focused on past performances, but the likely future success of the
fund. These funds have a minimum net asset of $100 million.
Matthews India Investor
(MINDX) seeks capital growth over the long term. The fund invests a
lion's share of its assets in publicly-traded Indian stocks and
securities. The fund prefers to invest in medium to large size
companies, but there is no restriction regarding this.
The non-diversified fund has returned 35.9% year to date.
The fund's total asset is $583.75 million. Top holdings include
Kotak Mahindra Bank Ltd, ITC Ltd and Gujarat Pipavav Port Ltd. All
of these companies are based in India.
PIMCO Real Estate Real Return Strategy A
(PETAX) seeks to provide maximum real return. The fund
invests in real estate-linked derivative instruments and a basket
of inflation-indexed securities to achieve its investment
objective. It also invests in Fixed Income Instruments issued by
domestic or foreign public and private sector entities.
The non-diversified fund has returned 27.2% year to date.
The fund's total asset is $3.8 billion.
JHFunds2 Real Estate Secs 1
(JIREX) seeks to provide long term growth of capital as well as
current income. The fund invests a large proportion of its assets
in equity securities issued by real estate investment trusts and
companies. Not more than 10% of its assets may be invested in
The non-diversified fund has returned 18.1% year to date.
The fund's total asset is $542.76 million. Top holdings include
Simon Property Group Inc (SPG), Ventas Inc (VTR) and Boston
Properties Inc (BXP)
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find
funds that not only outpaced the market in the past but are also
expected to outperform going forward. Learn more about the Zacks
Mutual Fund Rank at
View All Zacks #1 Ranked Mutual Funds
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