Trade wars, the threat of higher inflation, and interest rate decisions by central banks dominated the financial media headlines in the second quarter. However, it was the continued strength of the U.S. economy and corporate earnings that were the most relevant factors to investors. Talbot Financial’s benchmark index, the S&P 500 Total Return Index (“Index”), increased 3.4% for the second quarter. The Index was down 0.8% for the first quarter of the year; and therefore, through the first half of the year the Index increased 2.6%.
Second quarter Index returns were led by a rebound in the Energy sector, which followed several years of relative underperformance. Technology was another sector leader for the quarter, an industry we have long over-weighted driven by our conviction of the sustainable positive impact of technology advancements driven by cloud computing. The Financial sector was the notable laggard during the quarter over concerns banks will have trouble expanding margins with a flattening yield curve.