The start of the 2012 Summer Olympics fittingly coincides with a pivotal week for financial markets highlighted by central bank meetings and top-tier economic data, including the always-important monthly jobs report in the United States. Expectations for additional monetary stimulus increased sharply last week, as European Central Bank (ECB) president Mario Draghi said the ECB will “do whatever it takes” to save the euro. His comments suggest this week’s Federal Reserve Open Market Committee (FOMC) meeting (August 1, 2012) may take a back seat to the ECB. A strong policy response could push Treasury prices lower and yields higher, hurting highquality bonds in the process.
In the past week ending Wednesday, the LPL Financial “Wall Street” Election Poll index reflected a shift toward Republicans. After a surge for the Democrats in June, July has seen stabilization in the trend.
Over the past week, the overall market rose. Solid gains in the Republicanfavored Telecom and Energy-related industries offset losses in Managed Care. Declines in the Construction Materials industry group and underperformance of Homebuilders contributed to smaller gains overall for the Democrat-favored industries.