Asset Class Market Cycles (as of 06/30/2012)
U.S. Large Cap Stocks (10/01/2002 - Current)
U.S. Small Cap Stocks (10/01/2002 - Current)
The U.S. equity markets posted mild declines during
the quarter as the unemployment rate increased slightly
and consumer confidence declined. However, the latest
corporate earnings announcements were generally healthy.
The S&P 500 Total Return Index (S&P 500) declined -2.8%
for the quarter as the Utilities and Telecommunications
Services sectors outperformed on a relative basis, while
Financials and Information Technology stocks lagged.
Overall, global economic growth remains modest and the
impact of potential U.S. tax increases at year-end appears
to concern many investors. Furthermore, macro sentiment
continues to denominate market returns with sector
leadership generally reversing from the previous quarter
as the outperforming sectors from the first quarter of 2012
were among the weakest performers during the second
quarter. As such, the current market cycle for U.S. Large
Cap Stocks continues to span from “trough to current,”
beginning on 10/01/2002. In general, while large cap growth
stocks underperformed large cap value stocks during the
quarter, they continue to slightly outperform their value
counterparts over the current market cycle.
Small cap stocks generally underperformed their large
cap counterparts with the Russell 2000® Index declining
-3.5% for the quarter. While Information Technology stocks
also generally lagged on a relative basis within the small
cap space, small cap Financials were generally flat for the
quarter in contrast to the declines suffered by their large cap
counterparts. In general, small cap Energy equities were
the worst performing sector on a relative basis. Overall,
a slowdown in U.S. economic data is likely to negatively
impact small cap equities. Likewise, similar to most U.S.
equity mutual funds, small cap equity funds continued to
see outflows during the quarter. As such, the market cycle
for U.S. Small Cap Stocks continues to span from “trough to
current,” beginning on 10/01/2002. In general, while small
cap growth stocks underperformed small cap value stocks
during the quarter, they continue to surpass their value
counterparts over the current market cycle.
Market Cycle to Date - Current Stage: Bear
Market Cycle to Date - Current Stage: Bear
peak
$25,000
$20,000
$15,000
$25,000
peak
$20,000
$10,000
$15,000
trough
Bear Market
10/01/2002
06/01/2007
06/30/2012
Current Market Cycle Period
$10,000
Bear Market
trough
06/30/2012
10/01/2002
11/01/2007
Current Market Cycle Period
Russell 2000® Index Quarterly Growth of $10,000
Russell 2000® Growth Index Quarterly Growth of $10,000
Russell 2000® Value Index Quarterly Growth of $10,000
Previous Bear Market Period
S&P 500 Quarterly Growth of $10,000
Russell 1000® Growth Index Quarterly Growth of $10,000
Russell 1000® Value Index Quarterly Growth of $10,000
$20,000
Previous Bear Market Period
$15,000
$12,000
$10,000
$10,000
$8,000
trough
$6,000
trough
$4,000
$ 5,000
04/01/2000
09/30/2002
04/01/2000
09/30/2002
Previous Bear Market Period
Previous Bear Market Period
S&P 500
Russell 1000® Growth Index
Russell 1000® Value Index
Russell 2000® Index
Russell 2000® Growth Index
Russell 2000® Value Index
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International Stocks (04/01/2003 - Current)
Bonds (07/01/2003 - Current)
The broad international markets generally underperformed
their domestic counterparts as the MSCI EAFE Index
declined -7.1% for the quarter. Investors continued to
focus on sovereign debt concerns in Southern Europe
demanding higher yields on both Spanish and Italian
government debt. While European authorities provided
capital to several Spanish banking institutions and appear
to have taken additional steps to further stabilize the
region’s financial system, the ultimate outcome of the
ongoing policy discussions remains uncertain. Lastly, the
strengthening U.S. dollar further depressed international
equity returns for U.S. investors during the quarter. As
such, the market cycle for International Stocks continues
to span from “trough to current,” beginning on 04/01/2003.
International value stocks slightly outperformed
international growth stocks during the quarter, and
continue to maintain an advantage over international
growth stocks over the current market cycle.
Market Cycle to Date - Current Stage: Bear
The broad fixed income markets posted gains during the
quarter, with the Barclays Capital U.S. Aggregate Bond
Index up 2.1%. Interest rates declined along most parts of
the yield curve amidst somewhat weaker U.S. economic
data. Additionally, the Federal Reserve announced the
extension of its Operation Twist until year-end. As such,
U.S. Treasury securities generally outperformed corporate
bonds during the quarter as the BofA Merrill Lynch U.S.
Treasury Master Index increased 3.0% compared to a
2.4% increase for the BofA Merrill Lynch U.S. Corporate
Master Index. Additionally, as high-yield spreads
widened during the quarter, high-yield corporate bonds
underperformed their investment-grade counterparts, as
the BofA Merrill Lynch U.S. Corporate AA Index returned
2.6% for the quarter compared to a gain of 0.9% for the
BofA Merrill Lynch U.S. High Yield CCC- Index. With the
latest quarterly decline, interest rates remain near historic
lows. As such, from an interest rate perspective, the
current fixed income market cycle continues to span from
“trough to current,” beginning on 07/01/2003.
$30,000
Market Cycle to Date - Current Stage: Bull
peak
$25,000
8.00%
$20,000
7.00%
6.00%
$15,000
peak
5.00%
$10,000
4.00%
Bear Market
trough
3.00%
11/01/2007
04/01/2003
06/30/2012
Current Market Cycle Period
2.00%
1.00%
MSCI EAFE Index Quarterly Growth of $10,000
MSCI EAFE Value Index Quarterly Growth of $10,000
MSCI EAFE Growth Index Quarterly Growth of $10,000
0.00%
Bull Market
trough
07/01/2003
Previous Bear Market Period
07/01/2006
06/30/2012
Current Market Cycle Period
Federal Funds Rate
Merrill Lynch U.S. Corporate Master Yield
Ten Year Treasury Note Yield
$10,000
Previous Bull Market Period
$ 8,000
9.00%
8.00%
$ 6,000
trough
7.00%
6.00%
5.00%
$ 4,000
03/31/2003
01/01/2000
4.00%
3.00%
Previous Bear Market Period
2.00%
MSCI EAFE Index
MSCI EAFE Value Index
MSCI EAFE Growth Index
1.00%
trough
0.00%
07/01/2000
Previous Bull Market Period
06/30/2003
Federal Funds Rate
Merrill Lynch U.S. Corporate Master Yield
Ten Year Treasury Note Yield
Data sources: Wall Street Journal, Morningstar, FactSet, ISI, Inc., Bank of America Merrill Lynch
Approved CAG-CM PUB006a.2f (8/12)
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