Markets Move Up Around the World
Authored by Brad McMillan, senior vice president, chief investment officer, at Commonwealth Financial Network.

Equity markets around the world performed well in July, as positive U.S. economic developments combined with less-negative-than-expected international news to drive renewed investor confidence. The S&P 500 Index ended the month up 3.69 percent, while the Dow Jones Industrial Average gained slightly less, rising 2.94 percent. The NASDAQ led the group, posting a 6.65-percent gain. All three set all-time highs.

Earnings for the second quarter of 2016 came in better than expected. With 63 percent of S&P 500 companies reporting, the blended earnings decline of 3.8 percent was better than the 5.5-percent decline anticipated on June 30. Additionally, 71 percent of reporting companies announced earnings per share above estimates-higher than the five-year 67-percent average. When companies beat expectations, this often helps drive the markets higher, and we saw that in July.

Developed international markets were also up for the month, albeit following a bumpier ride. The MSCI EAFE Index of developed markets outside the U.S. gained 5.07 percent in July. Concerns about the failed coup in Turkey and fallout from the Brexit vote had initially driven the index down, but by month-end, the index had climbed above its 200-day moving average, a positive technical development.

Emerging markets also did well, gaining 5.03 percent in July. Despite the turmoil in Europe and Turkey, technical factors for the MSCI Emerging Markets Index remained positive, as it stayed above its 200-day moving average for the entire month.