August Market Commentary: A Turning Point?

By | September 9th, 2021|Markets, Volatility|

August Recap and September Outlook

The equity markets advanced during a month when the Delta variant ravaged some states, which reinvigorated flagging vaccination rates. Positive developments, such as a bi-partisan infrastructure package, were overtaken in the news cycle by the tumultuous exit from Afghanistan. The month finished with Hurricane Ida’s one-two punch to the South and the Northeast. The big miss on August employment numbers (released September 3rd) underscored the potential for damage that the Delta variant may hold for our still-recovering economy.

Lets Look at Some Highlights:

The Month Opened with Good News

The services sector, which at 67% of GDP is a huge part of our economy, has lagged throughout the recovery as the impact of shutdowns, supply chain issues, and labor shortages hampered the ramping back up. The ISM Services PMI index, which tracks non-manufacturing industries, jumped to 64.1 in July, a big increase over 60.1 in June. All 17 services industries reported growth, and the ISM Services Employment index rose to 53.8, from 49.3 in June, suggesting hiring conditions were improving.

But Consumer Confidence Told a Different Story

The University of Michigan consumer sentiment index was a big downside surprise. U.S. consumer confidence fell in August to the lowest level since 2011, as fears about the Delta variant and the reopening of the economy continued to spread. The consumer sentiment index fell 13% from the July reading to 70.2. Economists surveyed by Dow Jones expected a reading of 81.3 for August.

Employment Missed Big – and Services Took the Hit

The consensus expectation for employment was that the economy would add 733,000 jobs in August, building on a very strong July number. The actual number of jobs added back was 239,000. The U.S. Bureau of Labor Statistics reported that after averaging growth of 350,000 jobs per month for the last six months, employment in leisure and hospitality was flat. This sector remains down 10% from the pre-pandemic level of February 2020.

Equity Markets

  • The S&P 500 was up 2.90% in August bringing its YTD return to 20.41%
  • The Dow Jones Industrial Average rose 1.22% for the month and was up 15.53% YTD
  • The S&P Mid-Cap 400 increased 1.83% for the month resulting in a 19.36% YTD return
  • The S&P Small Cap 600 gained 1.90% in August, raising the YTD return to 22.15%.

Source: All performance quoted from S&P Dow Jones Indices.

The idea of a “new high” is beginning to get a little jaded. The S&P 500 has posted 53 new closing highs this year. The record year to beat is 1995, with 77 new closing highs. The month of August had 22 trading days, and the market posted new closing highs on 12 of them.

Ten of the eleven S&P 500 sectors gained, with Financials recovering from a loss last month to post the best performance, and Communication Services following right behind. Real Estate is the best performing sector in the index YTD. Energy declined, but less than last month, and is still up 26.60% YTD.

Bond Markets

Fed Chairman Powell got into his thinking about inflation at the Kansas City Fed’s annual Economic Policy Symposium in Jackson Hole. Powell is wary of getting out in front of the economy with policy decisions that take time to take hold. The caution comes from a fear that tightening in response to temporary factors could result in a situation where an “ill-timed policy move unnecessarily slows hiring and other economic activity.”

Powell also clarified the timing around tapering off the $120 billion of monthly bond purchases; he indicated a timeline more aligned to the end of the year. This is largely expected to result in rate increases, and Treasuries rebounded somewhat, but yields remain at low levels, compared to forecasts for close to 2% that we saw at the beginning of the year.

Apart from high yield, most fixed income sectors were negative for the month.

The Smart Investor

The August employment report is the first to include the damage from the Delta variant. With the surge still uncontrolled and the disruption of Hurricane Ida, it doesn’t bode well for the recovery to able to continue at the pace we’ve seen so far this year.  Companies are revisiting back-to-work timelines considering the virulence of the Delta strain, and it’s clearly have an impact on travel, vacation and resuming normal life.

In his remarks in Jackson Hole, Chairman Powell highlighted the strong July employment report as the basis for the recovering economy. With the downside surprise in August employment and the likelihood that September may also be lackluster, both the timeline for tapering and the timeline for rate increases may be lengthened. For investors, while equity markets are still booming right along, volatility is likely to increase, and bond markets may well continue to struggle. With four months left in the year, the Bloomberg Barclays U.S. Aggregate Bond Index is still in negative territory.

Reviewing portfolio assets to ensure that your income needs are met and that you can withstand potential volatility always makes sense. With the strong gains this year, it may also make sense to tune-up asset allocations, as outperformance may have pushed risk parameters out of alignment.

This work is powered by Seven Group under the Terms of Service and may be a derivative of the original. More information can be found here.
The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA

U.S. Performance Dashboard – August 2021

By | September 1st, 2021|Markets|

  • U.S. equities continued to march upward in August, climbing above 20% YTD. The S&P 500® posted a gain of 3% for the month, as the Fed’s dovish tone, combined with strong earnings reports, buoyed the market. While mega caps led, mid and small caps also posted gains, with the S&P MidCap 400® and the S&P SmallCap 600® both up 2%. Volatility declined, as the VIX® closed at 16.48.
  • All factors posted gains. “Risk-on” factors (e.g., Momentum and Growth) led in August, with “risk-off” factors (e.g., Low Volatility and High Yield) lagging.
  • All sectors except Energy posted gains, with Financials in the lead, up 5%.

 

August Market Update

Considering Private Real Estate?

By | August 12th, 2021|Markets, Volatility|

Today’s ultra-low-rate environment has created a path for other investment options to emerge in the market.

Historically, over the last 10 years private real estate has delivered:

  •  Higher average yields that stocks, bonds, or traded REITs
  •  Higher returns than fixed income with less volatility than stocks

“Consider the 4.8% average yield generated by privately held real estate over the last 10 years. This is well above the 2.2% and 2.0% averaged by US fixed income and equities respectively over that period, as well as the 3.8% yield from traded REITs. ”

 

The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.

U.S. Performance Dashboard – July 2021

By | August 2nd, 2021|Markets|

  • U.S. equities generally managed to end July in positive territory, with the S&P 500® posting a gain of 2%, despite concerns about slowing economic growth, the possible impact of the COVID “delta variant”, and rising inflation. Mid-caps posted slight gains, with the S&P MidCap 400® up 0.3%, and small-caps declined, as the S&P SmallCap 600® fell 2%. Volatility rose, with the VIX closing at 18.24.
  • Most factors posted gains, with the unlikely combination of Growth and Low Volatility in the lead. High Beta, the leading factor for the first six months of 2021, came last in July.
  • Most sectors posted gains, with Health Care in the lead, up 5%.

 

July Mar

U.S. Performance Dashboard – June 2021

By | July 1st, 2021|Markets|

  • U.S. equities ended Q2 with strength, with the S&P 500® posting a gain of 9%, despite inflation concerns and uncertainty over the future course of the Fed’s stimulus efforts. In a reversal from Q1, mid- and small-caps underperformed, with the S&P MidCap 400® and S&P SmallCap 600® up 4% and 5%, respectively. Volatility declined, with the VIX closing at 15.83.
  • All factors posted gains, with Momentum in the lead, after its disappointing performance in Q1. In another reversal, Growth outpaced Value.
  • All sectors except Utilities posted gains, with Real Estate in the lead, up 13%.
June 2021 market update pdf

US Equity Performance Dashboard – November 2020

By | December 2nd, 2020|Markets|

  • A major reversal in the U.S. markets occurred in November, thanks to promising developments on COVID-19 vaccines along with a putatively benign outcome of the Presidential and Congressional elections. The S&P 500® gained 11%, its best performance since April, while smaller caps outperformed, with the S&P MidCap 400® and the S&P SmallCap 600® rising 14% and 18%, respectively. Volatility declined, as VIX® closed the month at 20.57.
  • All factor indices gained, as High Beta and Enhanced Value strategies topped the factor league table. Consistent with the reversal theme, Equal Weight outperformed, while Value outperformed Growth.
  • Not surprisingly, sector dispersion widened in November, as history shows that sectors tend to be especially important during the Novembers when Presidential elections take place. Energy, up a remarkable 28%, was the month’s top performing sector after years of underperformance.
dashboard-us-2020-11

Quarterly Market Review – Q3 2020

By | October 7th, 2020|DFA, Dimensional Fund Advisors, Markets|

This report features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.

The report also illustrates the impact of globally diversified portfolios and features a quarterly topic.

Click HERE to download this quarter’s breakdown!

What History Tells Us About US Presidential Elections and the Market

By | October 2nd, 2020|Markets|

It’s natural for investors to seek a connection between who wins the White House and which way stocks will go. But a look at history underscores that shareholders are investing in companies, not a political party.

What History Tells Us About US Presidential Elections and the Market

How Much Impact Does the President Have on Stocks?

By | October 2nd, 2020|Markets|

How Much Impact Does the President Have on Stocks

 

 

Click HERE to download this interactive exhibit that examines market and economic data for nearly 100 years of US presidential terms.

 

Park + Elm ADV

By | August 5th, 2020|Markets|

Form ADV 2A & 2B - 2.13.20
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