Bond yields around the world generally remain low. In the U.S., the benchmark 10-year Treasury yield fell to 1.46 percent. The Moody’s Baa corporate-bond average yield was 4.2 percent at the end of July, resulting in a spread of 2.74 percentage points, relatively high by historical standards. Still, with many global sovereign-bond yields now in negative territory, U.S. bond markets compare favorably. At some point, and no one knows exactly when, yields are likely to move higher, and bond investors may be in for tough times.
The price of gold has generally been moving higher throughout 2016, though at $1,342 an ounce, it is well below its peak of around $1,800 an ounce in 2011. Many other commodity prices rose in early 2016, but some commodities, like crude oil, copper, and corn, have declined a bit recently. Global demand, driven by global growth, and the strength of the dollar remain the key drivers for commodity prices in general, though each commodity has its own fundamentals.
European equity markets have rebounded from the Brexit vote fallout. Since June 23, the U.K.’s FTSE 100 has posted the best performance among the major markets in Europe, rising 6 percent. Germany is just slightly ahead of its June 23 level, while France and Italy are still below the June 23 mark, though all are well above the lows that occurred in the days after the vote.
Japan and the U.S. are both up about 2 percent since June 23. In the U.S., somewhat better economic data has reinforced what appear to be solid results for second-quarter corporate profits. According to data from FactSet, with 324 companies in the Standard & Poor’s Composite Index of 500 Stocks reporting results so far (Table 2), both sales and earnings per share are on track to beat consensus expectations. Consumer discretionary, telecom, and health-care stocks are leading the way on sales and earnings per share growth for the second quarter. Continued gains on both the top line and bottom line will be crucial to supporting further appreciation in prices.