Equity markets retreated during the Memorial Day shortened trading week. Concerns over Greece’s ability to complete a deal and avert its exit from the Eurozone, as well as interest rate worries here in the U.S., weighed on markets. The S&P 500 closed down just over 1%, as economic data continues to contribute to choppy trading action.
Recently, we have been highlighting the up and down nature of economic data. The week past offered more of the same. Tuesday presented positive announcements from durable goods, housing starts and consumer confidence. Friday, economic data was weaker as 1st quarter gross domestic product (“GDP”) was negative, the Chicago Purchasing Manager index was lower, and personal consumption lighter than expected.
Greece was back in the headlines, much to the world’s chagrin. They owe a $300 million payment to the International Monetary Fund on June 5th and there are significant risks that they may default on this payment. There continues to be a possibility the two sides come to a compromise, but the odds of a long-term restructuring of Greece’s debt still hangs in the balance.
Among the many indicators we track are mutual funds flows. Of interest, for the 12-month period ended April 2015, passive U.S. equity mutual funds and exchange traded funds (“ETFs”) reported net inflows totaling $159.7 billion, compared to net outflows totaling $151.0 billion for active mutual funds and ETFs, according to Morningstar. Similar trends favoring passive management were reported for international equity categories. Here at MPCA we hold a contrarian view, and believe that skilled management and equity selection (also known as good old-fashioned stock picking) can add value in the middle to late innings of a long-running equity advance. Hence, our portfolios contain both actively managed and passively managed funds, dictated by our ongoing selection process.