Volatile Second Quarter Sets New Lows for 2010

If ever a quarter announced its promise of better times only to retreat in confusion, the second quarter of 2010 might claim that distinction. It was a quarter of highs and lows for the year, marked by an unprecedented half-hour meltdown – still not fully explained –  when in early May nearly 1,000 points were shaved off the Dow Jones Industrial Average before the index recovered for a substantial, but not nearly as dramatic, loss. 

Highs for 2010 so far were reached in late April, after which values steadily declined to the lows for the year, reached at the end of June. All the major indices recorded losses as the quarter ended (see figures below). 


                                                                  June 30, 2010 Close           March 3, 2010 Close           Gain/Loss
                                 DJIA                                   9,773.79                            10,856.63                       - 9.97%
                                 NASDAQ                              2,109.24                             2,397.96                       -12.04%
                                 S&P 500                             1,030.43                             1,169.43                       -11.86%


The reasons for decline were numerous. As the quarter ended, the U.S. consumer confidence index plunged to its lowest level since March. The June figure reflected increasing concern about the slow pace of real job growth, as well as the general economic malaise. Reports that U.S. home prices rose in April – for the first time in seven months (but spurred by the expiration of the home buyers’ tax credit program) – and that incomes outgrew spending in May excited little investor interest. Offsetting these were lackluster job growth data and a bleak report that new home sales declined 33% in May (from the April numbers) to the lowest level on record. That means fewer jobs in the construction industry, which is often an engine for economic recoveries.

Global concerns during the quarter drove down market values nearly everywhere. They ranged from worries about excessive debt in Greece and some other European Union countries – including the related fate of the euro – to the BP oil spill in the Gulf of Mexico and a downgrading of Chinese economic growth by the Conference board.

There is no question that we are in a period of global market uncertainty. This may be the right time for you to check the diversified nature of your portfolio to ensure that you are comfortable with it – and that it is positioned to take advantage of the markets during the rest of 2010. We would be pleased to review your portfolio, if you wish.  Just contact us.

Investing involves risk, and investors may incur a profit or a loss. Past performance is not an indication of future results. Investors cannot invest directly in an index. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks.