Kai W. Hong, CFA
Managing Director & Chief Investment Strategist

The month started inauspiciously enough with news of Greece’s default on a payment due to the IMF and the subsequent rejection of bailout terms by Greek voters in a snap referendum. While somewhat expected, the actual events still had the effect of unnerving investors in a period when good macro news was hard to come by. An improving US job market (although not on the wages front) and some M&A activity (particularly in Health Care) offered some comfort, but markets remained mostly range-bound. Chinese equity markets continued to fluctuate despite further efforts by the Chinese government to support prices. Towards the end of the month, an abrupt about-face by the Greek prime minister on rescue terms brought that debt crisis to a temporary pause. A historical agreement on Iran’s nuclear program was a geopolitical bright spot, but the actual implementation and impacts were still to be determined. And in a further example of the mixed nature of recent macro news, the Q2 US GDP estimate came in at 2.3% with a upgrade of Q1 US GDP to 0.6% (from a 0.2% drop initially), but historical revisions showed that GDP growth for the last three years was weaker than originally projected (2.1% annualized versus 2.4% annualized).

In an oddly exact reversal from June’s 1.7% decline, the broad market Russell 3000 Index finished the month at +1.7%. US small cap stocks reversed their recent gains with the Russell 2000 Index returning -1.2%. Outside of the US, the developed markets were essentially in-line with the US as the MSCI World ex USA Index returned +1.6%. However, developing markets continued their dramatic absolute and relative collapse with the MSCI Emerging Markets Index returning -6.9%.