Market View Weekly - Aug 20th

David Pintaric

August 24, 2021

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Unsettling news

After the Dow Industrials and S&P 500 index climbed to new record highs to begin the week, stocks pulled back amid weaker-than-expected retail sales, festering concerns about the Delta variant, and slowing growth in China.

The stock market retreat accelerated mid-week with the release of the FOMC (Federal Open Market Committee) meeting minutes, which signaled that Fed officials may be ready to begin reducing its monthly bond purchases before the end of the year. Stocks managed to stabilize on Friday, paring some of the week’s losses. Consumer staples, health care, real estate, and utilities were the top-performing groups.

Market Update

Observations

U.S. equities moved lower this week as indicated by the S&P 500 which was down -0.55% on the week.

In the U.S., smaller sized companies underperformed their larger-sized counterparts, as the Russell 2000 index decreased -2.47% on the week.

International stocks were negative on the week, down -2.95%, underperforming domestic stocks, as measured by the MSCI EAFE.

Emerging market stocks were negative on the week with the MSCI EM index down -4.62%.

U.S. investment grade bonds were positive last week with the Bloomberg Barclays U.S. Aggregate Bond index up +0.16%.

By the Numbers

MONTHLY BENEFIT - 54 million Americans receive monthly Social Security retirement benefits, including retired workers, dependents of retired workers, and survivors of deceased workers. 42 million Americans receive monthly assistance from the Supplemental Nutrition Assistance Program (SNAP), aka “food stamps” (source: SNAP).

SKIP THE PUMP - There are 43,600 electric vehicle (EV) charging stations in the USA. The $1.2 trillion infrastructure bill passed by the Senate allocates $7.5 billion for additional charging stations (source: DOE).

NEED A LOT OF RAIN - The government announced on 8/16/21 reductions to the allocation of water taken from Lake Mead (beginning in January 2022) for the states of Arizona and Nevada, along with cutbacks to Mexico. Arizona’s decrease is equal to 18% of what they currently receive from Lake Mead or 8% of the state’s total water usage. California will not see any water reduction at this time (source: Bureau of Reclamation).

JUST SPEND THE MONEY - The Treasury Department distributed $15 billion in July 2021 and has distributed another $15 billion this month (through Friday 8/13/21) per the expanded Child Tax Credit (CTC) that was part of the “American Rescue Plan Act” that was signed into law by President Joe Biden on 3/11/21. The payments are currently scheduled to continue through the end of 2021 (source: American Rescue Plan Act).

^{1Data obtained from Bloomberg as of 8/20/2021}

^{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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