Market View Weekly - Aug 16th

David Pintaric

August 18, 2021

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QUIETLY CLIMBING

Stocks moved higher amid relatively light trading last week. After initially retreating under the weight of Delta variant updates, stocks grinded higher, catalyzed by the Senate’s passage of a $1 trillion infrastructure bill.

Two themes emerged last week. The first was that inflation assumed a less threatening profile. The most recent Consumer Price Index report showed some moderation in consumer price increases, while investors appeared to interpret a hotter-than-expected Producer Price Index report as the peak in this inflation cycle.

Also worth noting were comments by multiple Federal Reserve Bank regional presidents suggesting that the time for tapering (i.e., ending the Fed’s bond purchases) was nearing, with one intimating that tapering could start as early as October.

Market Update

Observations

U.S. equities moved higher this week as indicated by the S&P 500 which was up +0.75% on the week.

In the U.S., smaller sized companies underperformed their larger-sized counterparts, as the Russell 2000 index decreased -1.06% on the week.

International stocks were positive on the week, up +1.56%, as measured by the MSCI EAFE, outperforming domestic stocks.

Emerging market stocks were negative on the week with the MSCI EM index down -0.85%.

U.S. investment grade bonds were positive last week with the Bloomberg Barclays U.S. Aggregate Bond index up +0.11%.

By the Numbers

AT LEAST TEN - The S&P 500 is up +20.0% YTD (total return) through the close of trading last Friday 8/13/21. The index has produced a “double-digit” total return gain in 7 of the last 10 years (2011-2020). The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).

WORLD’S BIGGEST - The size of the US economy was $22.7 trillion as of 6/30/21. 10 years ago (6/30/11), the size of the US economy was $15.6 trillion. 20 years ago (6/30/01), the size of the US economy was $10.6 trillion. 30 years ago (6/30/91), the size of the US economy was $6.1 trillion (source: Bureau of Economic Analysis).

A LOT OF HELP WANTED - American employers had 10.1 million job openings as of 6/30/21, an all-time record for an employment statistic that has been tracked by our government since December 2000. Domestic employers had 6.9 million job openings as of 2/29/20 at the beginning of the global pandemic (source: Department of Labor).

^{1Data obtained from Bloomberg as of 8/13/2021}

^{Index Definitions}

^{S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.}

^{NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.}

^{Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.}

^{Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.}

^{Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.}

^{MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.}

^{MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.}

^{Bloomberg Barclays US Agg Bond: The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).}

^{Bloomberg Barclays High Yield Corp: The Bloomberg Barclays US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.}

^{Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.}

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^{In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.}

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