Will the Quiet Summer Breeze Bring in a Steamy 2nd Half?

Rising contagion in Greece and Puerto Rico drove U.S. equity markets lower as we closed out the second quarter and entered July.  Here along the beautiful coast of South Carolina, most investors focused on these negative events within the global credit markets, and missed the positive local news.  On July 1, Moody’s Investors Service upgraded the City of Charleston Water and Sewer System revenue bonds to Aaa.  The system is now one of just 10 wastewater utility systems in the country to hold Moody’s highest possible rating.  This news went mostly unnoticed, masked by the cacophony of Greece and Puerto Rico.  Although news sources reported on these situations with typical fervor, neither should come as a surprise, as both entities have both been running out of money for years.

The equity markets seemed to remember this quickly and shrug off concern.  Within a week, the Dow marched back above 18,000.  Simultaneously, the S&P 500 volatility index (VIX), dropped throughout the month of June.  As of yesterday’s close, the VIX stood at 11.95.  Over the past ten years, there have only been three notable periods when the VIX stood lower; spring 2006, late 2006, and last summer.

The VIX merely measures expected volatility in either direction.  But this low level, combined with the market’s resilience to this summer’s geopolitical speedbump, is very possibly an indication that we have entered what will become a strong second half of 2015 for the equity markets.

Source: Yahoo! Finance © 2015 Pawleys Capital Management, LLC. All rights reserved.

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