Second Quarter 2015 Quarterly Economic Review

July 29, 2015

Second quarter 2015 saw investors shift their focus from oil prices and the dollar to the sustainability of the U.S. economic recovery and the timing of the Federal Reserve’s first interest rate hike. Weak first quarter corporate earnings, the ongoing stalemate between Greece and its creditors, and a sharp rise in European yields also vied for investors’ attention. With so many cross currents swirling, markets were largely range bound, resulting in muted returns.

Following disappointing U.S. economic growth in the first quarter, investors were eager for signs of improvement in the second. Housing proved to be the bright spot while other sectors, such as manufacturing, struggled to gain traction. Improvements in employment, highlighted by a new recovery low unemployment rate of 5.3% in June, raised the usual questions regarding the timing of the Fed’s first rate increase.

Outside of the U.S., the international scene was quite mixed. While international developed markets such as the Euro Zone and Japan witnessed an improvement in economic data, major emerging markets including China, Brazil and Russia generally exhibited signs of slowing. Additionally, investors were consumed towards the end of the quarter by the rapidly unfolding events between Greece and its creditors and, to a lesser extent, the sharp selloff in China’s equity markets.