The Nasdaq Composite finished the quarter with a total return of 6.61%, followed by the S&P 500 Index with a total return of 3.43%, while the Dow Jones Industrial Average gained 1.26%. Seven of the eleven sectors in the S&P 500 posted positive returns during the period. Energy and Consumer Discretionary were the biggest winners with returns of 13.5% and 8.2%, respectively. Small-cap stocks outperformed large-cap stocks, which beat mid-cap names. Specifically, the Russell 2000 Index’s 7.8% gain did better than Russell 1000 Index and the Russell Mid-Cap Index which posted gains of 3.6% and 2.8%, respectively for the quarter. Growth stocks continued to beat their value counterparts, as the Russell 1000 Growth Index rose 5.8% compared to the 1.2% gain of the Russell 1000 Value Index over the same period. Stocks outperformed bonds, with the Barclays Aggregate Total Return underperforming all equity benchmarks, with a -0.19% loss. Long-dated US Treasuries underperformed, with the Barclays Long-Term Treasury Index gaining 0.42%. The US Dollar Index gained 5.0% for the quarter while oil continued its gain by rising 14.4%. Gold declined over the period losing -5.9%.
The second quarter rebounded from the decline seen in the first quarter to end the period in the green. The Trump Administration continued to shake up trade policy by implementing additional tariffs and threatening auto tariffs. China, Canada, Mexico and the EU have all retaliated by implementing their own tariffs on US goods. The Administration also made news over the quarter by pulling out of the Iran Nuclear Deal while also meeting with the North Korean leader Kim Jung Un and signing an agreement committing to work together to “build a lasting and stable peace regime in the Korean Peninsula”. A Federal Judge approved AT&T’s purchase of Time Warner for $85M going against the Justice Department’s recommendation. The Federal Reserve raised its benchmark interest rate to a range between 1.75% and 2% in June as the Fed continues to move away from its post-crisis stimulus while the European Central Bank laid out plans to taper its monthly bond purchases beginning in October and shutting down the program by the end of the year. However, it stated that it sees interest rates staying steady “at least through the summer of 2019”. Canada voted to legalize recreational marijuana nationwide, becoming the second country in the world to do so. Recep Tayyip Erdogan won re-election in Turkey after securing the majority of the votes. Under his new term he will assume sweeping new powers after a controversial referendum last year.
The views expressed in this commentary reflect those of Miller Value Partners analysts as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.
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