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June 2012 Recap
Hello, and welcome to the State Farm market recap audio broadcast. Each month, we offer a perspective on recent events impacting the financial markets in the U.S. and abroad. This is the recap for the month of June 2012.
Equity markets rallied higher in June reversing the downward trend experienced in April and May. The major U.S. indices saw much volatility throughout the month as investors tried to sort out the developments at home and overseas but moved solidly into positive territory after a strong market rally on the last trading day of the month.
Let's first review the U.S. equities markets.
In the U.S., stocks rebounded in June as investors turned more optimistic about the ability of European leaders to contain its debt crisis and directed their investments into equities and high-yield markets. Led by a strong 2.5 percent rally the last trading day of the month, the S&P 500 Index closed out the month with a positive 4.1 percent total return and increased its year-to-date return to a positive 9.5 percent. In June, small-cap stocks as measured by the Russell 2000 Index, led all domestic equity markets higher for the month, advancing 5.0 percent, followed by large-cap stocks which gained 4.1 percent and mid-cap stocks which advanced 2.8 percent, respectively.
Every sector within the S&P 500 posted positive results for the month, led by energy, telecommunication services and financials, which gained 5.6 percent, 5.4 percent, and 4.9 percent, respectively. Four of the S&P sectors are up more than 12 percent year-to-date including, telecommunication services, information technology, financials and consumer discretionary. In June, growth stocks outpaced value stocks across all market capitalizations.
Let's now turn our attention to the foreign equities markets.
Non-U.S. stock markets posted strong gains in June after experiencing back-to-back months of sharp declines. News that European leaders had agreed on a series of measures to relieve the region's debt crisis sent the markets on a one day rally the last trading day of the month. As a result for the month, the MSCI EAFE Free Index of developed countries posted a positive 7.0 percent total return while the MSCI EM of emerging countries advanced 3.9 percent.
Japanese stocks gained back some ground in June, climbing 5.1 percent in U.S. dollar terms, as falling commodity prices boosted exports and increased profitability for several of the country's largest manufacturers. Year-to-date the Japanese market is up 3.1 percent as the country continues to combat a rising yen and export pressures, each impacted by the European financial crisis.
Let's now switch our focus to the U.S. fixed income markets.
After a period of record inflows into U.S. Treasuries, investors reversed course and sought out the riskier assets of equities and high yield instruments. As a result, the Barclays U.S. Aggregate Bond Index ended the month with a slight 0.04 percent total return while high-yield bonds, as measured by the Barclays High-Yield Index, gained a modest 2.1 percent for the month. Over the longer 1- and 5-year time periods, long-term government bonds, as represented by the Barclays U.S. Aggregate Index, have posted positive total returns of 7.5 percent and 6.8 percent, respectively.
U.S. municipal bonds were relatively flat for the month as the Barclays Municipal Bond Index declined 0.1 percent. Over the longer 1- and 5-year periods, municipal bonds have posted positive total returns of 9.9 percent, and 6.0 percent, respectively.
U.S. Treasury Yields climbed higher across all time periods in June after experiencing near historic lows in May. As a result, the yield on the benchmark 10-Year Treasury Note closed the month at 1.67 percent up from 1.59 percent at the end of May. The 30-Year Treasury Bond yield, which touched 2.53 percent at the beginning of the month, climbed back to close the month at 2.76 percent.
With that, we will conclude this broadcast. Thank you again for listening to the State Farm Market Recap. Please join us again next month for the latest market review.
Financial analysts expect corporate earnings to decline nearly 2 percent for the April through June quarter compared to a year ago, breaking a streak of 10 quarters of positive year-over-year gains that started in the last quarter of 2009. How will the financial markets react if corporate earnings report less than a year ago?
Securities through registered representatives of State Farm VP Management Corp., One State Farm Plaza, Bloomington, Illinois 61710-0001, 1-800-447-4930.
This recap has been prepared by State Farm VP Management Corp. for informational purposes. The information contained herein has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. Any opinions discussed herein reflect our judgment as of the date of publication and are subject to change without notice. This material should not be considered a recommendation to purchase or sell any security.
Mutual Funds Disclosures
It is not possible to invest directly in an index.
The Russell 2000® Index tracks the common stock performance of the 2,000 smallest U.S. companies in the Russell 3000® Index
The Russell 2500 Index tracks the 2,500 smallest companies in the Russell 3000 Index.
The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index.
The Russell Midcap Index measures the performance of the mid-cap segment of the US equity market and is a subset of the Russell 1000 Index.
The Dow Jones Industrial Average is an unmanaged average of 30 actively traded stocks.
The NASDAQ Composite is an unmanaged market capitalization weighted index that is designed to represent the performance of the National Market System.
The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.
The S&P 1500 Index is a stock market index of U.S. stock that includes all stocks in the large cap S&P 500 Index, the mid cap S&P 400 Index, and the small cap S&P 600 Index.
The Morgan Stanley Capital International Europe, Australasia and Far East Free (EAFE® Free) Index currently measures the performance of stock markets of Europe, Australia, New Zealand, and the Far East.
The Morgan Stanley Capital International Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.
The Barclays Capital 1-5 Year U.S. Treasury Index measures the performance of short-term U.S. Treasury Securities maturing within one to five years.
The Barclays Capital U.S. Aggregate Bond Index represents debt securities in the U.S. investment grade fixed rate bond market.
The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
The Barclays Capital High Yield Index includes all fixed income securities having a maximum quality rating from Moodys Investor Service of Ba1, a minimum amount outstanding of $100 million, and at least one year to maturity.
The Barclays Capital TIPS Index measures the performance of the US Treasury Inflation-Protected Securities (TIPS) market.
The Citigroup 3 Month T-Bill Index is an average of the last 3-month Treasury bill issues (excluding the current month-end bill).
The FTSE EPRA/NAREIT Developed REIT and Non-Reit Index is a subset of the Developed Index, which is designed to track the performance of listed real estate companies and REITS worldwide.
The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The Nikkei 225 Index is a price-weighted index comprised of Japans top 225 blue-chip companies on the Tokyo Stock Exchange.
The Credit Suisse High Yield Index is designed to mirror the investible universe of the $U.S. Denominated high yield debt market.
Standard & Poors®, S&P®, S&P 500®, Standard and Poors 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by State Farm Life Insurance Company, State Farm Life and Accident Assurance Company and the State Farm Variable Product Trust. Neither the Large Cap Equity Index Fund nor the Stock and Bond Balanced Fund is sponsored, endorsed, sold or promoted by Standard & Poors, and Standard & Poors makes no representation regarding the advisability of investing in the Large Cap Equity Index Fund or the Stock and Bond Balanced Fund.
The Russell 2000® Index is a trademark/service mark, and Russell is a trademark of the Frank Russell Company. The Small Cap Equity Index Fund is not sponsored, endorsed, sold or promoted by, nor in any way affiliated with the Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Small Cap Equity Index Fund nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
The EAFE® Free Index is a trademark, service mark and the exclusive property of Morgan Stanley Capital International, Inc. (MSCI) and its affiliates and has been licensed for use by the State Farm Variable Product Trust (the Trust). The International Equity Index Fund (the Fund), based on the EAFE® Free Index, has not been passed on by MSCI as to its legality or suitability, and is not issued, sponsored, endorsed, sold or promoted by MSCI. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The Trusts Prospectus contains a more detailed description of the limited relationship MSCI has with the Trust and the Fund.
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