Market View Weekly - Aug 27th

David Pintaric

September 01, 2021

PUSHING HIGHER

Stocks surged to begin the week as investor sentiment improved on news of the FDA’s approval of its first COVID-19 vaccine, a strong housing number and comments by the Federal Reserve Bank-Dallas president that he would support delaying tapering if the Delta variant spread worsened.

Stocks continued their climb through midweek, pushing the S&P 500 to another record high and the NASDAQ Composite above 15,000 for the first time. The S&P 500 and NASDAQ Composite closed the week at record highs following Fed Chair Powell’s comments that Fed is likely to begin winding down its monthly bond purchases (aka tapering) by year-end, though no interest rate hikes were imminent.

Market Update

Observations

U.S. equities moved higher this week as indicated by the S&P 500 which was up +1.54% on the week.

In the U.S., smaller sized companies outperformed their larger-sized counterparts, as the Russell 2000 index increased +5.06% on the week.

International stocks were positive on the week, up +1.86%, outperforming domestic stocks, as measured by the MSCI EAFE.

Emerging market stocks were positive on the week with the MSCI EM index up +4.28%.

U.S. investment grade bonds were negative last week with the Bloomberg Barclays U.S. Aggregate Bond index down -0.05%.

By the Numbers

BULL RACES ON -From its 3/23/20 closing price through the end of trading last Friday 8/27/21, the S&P 500 has gained +106.3% (total return) and set 72 all-time closing highs. 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).

CONSECUTIVE BEARS - Over the last 75 years, the shortest time period between the end of one bear market for stocks and the beginning of another bear market for stocks is 26 months. The S&P 500 fell 22% during a bear market that ended on 10/07/66. The next bear market for the stock market, an 18-month long tumble of 36% began its downward slide on 11/29/68. The latest bear market for stocks, a decline of 34% over just 33 days, ended on 3/23/20 or 17 months ago (source: BTN Research).

BRAND NEW HOMES - The median sales price of a new home sold in the USA in June 2021 was $390,500, an all-time record high both on a nominal basis and on an inflation-adjusted basis. The old nominal record was $374,400 in April 2021. The old inflation-adjusted record was $345,800 in May 2017, equal to $383,898 in today’s dollars (source: Census Bureau).

IN A WEEK - An estimated 7.5 million out-of-work Americans will stop receiving federal unemployment insurance benefits a week from today (Monday 9/06/21). The group will lose the $300 of weekly benefits that they have been receiving since late December 2020 (source: Pandemic Unemployment Assistance).

^{1Data obtained from Bloomberg as of 8/27/2021}

^{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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