FL Stock Index 2012-06-01 to 2012-06-30

Summary:
Florida's stock index declined once again in June, losing 1.43% from May but remaining 3.91% higher than one year ago. Moreover, this marks the second consecutive month of decline for the index, but it remains up 7.41% year-to-date. Although the S&P 500 only dropped by 1.33% in June, Florida's index is still ahead by almost 4%, mostly due to the state's high weighting in consumer discretionary. Since 2000, this sector has only been outpaced by three others: energy, information technology, and--as of this month--utilities. However, energy remains by far the biggest gainer over the past decade.

Extended Analysis:
After starting the month of June relatively flat for the year, the S&P 500 index managed to erase some of its late May losses. However, the comeback was not strong enough to put its monthly average—or that of Florida’s stock index––above May’s. This situation provides a unique opportunity of observing the difference between following daily close prices and monthly averages, because while the monthly average shows Florida’s index losing ground the daily prices indicate a short-term positive trend as we move into July. Breaking the S&P 500 down further, it can be seen that the financial sector (which accounts for about 9% of Florida’s employment) was one of the worst-performing sectors when comparing month-over-month, but improved the most in June when viewed on a daily basis. Overall, every sector of the S&P 500 improved from the first day of June to the last with a range of 4.17% to 8.92%. Therefore, even though June marked the second month of decline for Florida’s index, there are positive indications going forward. Moreover, though there are some slight differences in magnitude Florida’s index remains highly correlated with the S&P 500 because most sectors are still moving in tandem, as news of the global recovery continues to control most stocks.

June got off to a tumultuous start, as indexes fell on first day of the month due to concerns over the Eurozone sovereign-debt crisis and weak U.S. economic data. Europe’s issues started early in the month in Greece, as elections were scheduled to be held once again on June 17 with hopes that the country would finally form a stable government. In the U.S., initial unemployment claims rose and the Office of Economic and Demographic Research (EDR) revised their first quarter 2012 GDP figure, showing that the pace of the economy was slowing. Even though not backed by solid data, investors experienced positive returns the following week. Members of the G7—seven countries that collectively make up over 50% of global nominal GDP—met that week and assured investors that their central banks would do whatever would be necessary to stimulate growth. Many took solace in this assurance since the G7 includes the U.S. and several Eurozone members. The week of June 10 began somewhat shaky, as investors became concerned again about the European debt crisis when Spain requested a bailout to help its struggling economy and rising yields. This might have been a very dangerous week’s start for the stock market since Greece’s elections were to be held the following weekend, had the central banks not been willing to once again offer assistance if a government was not formed (even though the ECB left rates untouched). Instead, the week ended on a positive note. The following week saw major indexes decline, as the Federal Open Market Committee’s meeting sparked investor concerns early in the week, and later it became obvious that Cyprus would be the fifth European country to request a bailout. Fears worsened as German Chancellor Angela Merkel made uncomforting statements—essentially asserting that her country would not loosen its position of austerity—just as members of the European Union (EU) prepared to meet in Brussels. Even so, the month ended on a positive note as the leaders attending the EU summit appeared to make headway regarding the crisis, agreeing to use rescue funds from the European Financial Stability Fund and the European Stability Mechanism to directly inject money into struggling banks. Although this required concession from Chancellor Merkel, she did insist that others agree to set up a supervisory institution for European banks.

Even though the month ended with positive results out of Europe, there are still many gaps in the bailout plan, not to mention that many Eurozone members still have struggling economies. Unfortunately, other than promises and policies, there was not much positive news in June. Moreover, even with the improvement seen throughout the month, indexes remain below levels from early May. Therefore, even with the momentum going into June, we feel that Florida’s stock index will fall again in July, perhaps to around 151.