April and May were up with a new high on the S&P 500 being made late in May, then reversing with June taking us lower. The following are performance numbers from various popular indexes. Index numbers are not individually comparable to a properly diversified portfolio. Each portfolio may include an allocation to securities similar to these indexes in varying amounts based on your personal risk tolerance and should only be compared in that context. The S&P 500 reflected an increase of 1.2% for the first six months of 2015. The Dow Jones Industrial Average was flat. Small company stocks represented by the Russell 2000 Index ended up 4.7% for the year. International equities as represented by the MSCI World Ex U.S. Index were up 4.3%. Fixed Income as represented by the Barclays Aggregate Bond Index closed down 0.1% for the year.

The first half of 2015 is behind us and although some expected scenarios panned out, there were a few significant surprises such as the softening in the U.S economy which caused interest rates to fall early in the year. The U.S. got off to a difficult start while Europe fared better than had been expected. The Federal Reserve is looking to set a course to raise interest rates here in the U.S. for the first time since 2006, while major economies overseas such as the Bank of Japan and the European Central Bank have been in easing mode, creating diverging policies which had the effect of boosting the U.S. Dollar relative to other currencies and pushing commodities prices lower. This will certainly create some volatility, however a lot of these expectations have been priced in and in this continued low inflationary environment such rate increases will most likely remain subdued.

The big question on the U.S. Economy is whether the first quarter of poor GDP growth was an aberration and do we believe that the second quarter will bring things back in line with a nice bounce back or indicate a further decline in growth. Although we have seen unit labor costs rise and productivity has declined in recent quarters, the declining interest rates have been a continued boost to companies as they further de-lever their balance sheets. Additionally, energy prices dropping have created some cost savings. With the start of the second-quarter’s company earnings season under way, a picture will start to form relatively soon. Overseas, Greece is at the forefront of many discussions as the Greece-Eurozone showdown comes to a head with virtually no progress toward an agreement since the Syriza government took office in January.

Bottom line question: How does the crisis affects us and the global financial system. The Greek debt crisis began in 2010. Most international banks and foreign investors have significantly reduced their holdings to where they are no longer vulnerable. Some of the other crisis countries in the Eurozone such as Spain, Ireland and Portugal have taken steps to overhaul their economies and are therefore much less vulnerable as well and given that the European Central Bank has established powerful counter measures by committing to purchase huge amounts of Eurozone government bonds if needed, a domino effect is less likely. Nonetheless, there are some unpredictable factors despite Greece being a very small part of the Eurozone economy. The potential exit of Greece from the European Union would be legally complex since it represents uncharted territory and there are no provisions for this unique event. With the U.S. growth and China’s growth slowing, the U.S contributes more to global GDP growth than China for the first time since 2006. Core inflation remains contained. The Federal Reserve is intent on pacing any rate increases in a very measured way. The European Central Bank has large-scale quantitative easing programs in place with some positive impact. U.S. equities still enjoy decent valuations and the stock market continues to prove resilient. Things on the balance remain positive and equities remain one of the most attractive places to be overall and this to include increasing emphasis in foreign equities at this juncture given relative valuation levels.

We thank you for the opportunity to serve you and wish you a wonderful summer.