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Weekly Investment Perspective

Keep up-to-date with our Weekly Investment Perspective.

U.S. equities fell last week despite strong bank earnings and June retail sales. For the week, the S&P 500 was down 0.97%, the Nasdaq down 1.87%, and the Dow Jones down 0.52%. Meanwhile, long-term interest rates have tumbled in recent weeks with the 10-year Treasury yield falling to 1.21% as of Monday morning July 19, down from 1.5% a month ago and the first quarter high of 1.75%.  All major groups in the S&P 500 have retreated, led by commodity, financial and industrial companies.  See below for a list of major indexes and their year-to-date total returns.

Recovery from the pandemic has and will continue to be very different around the globe. Uncertainty around the COVID-19 variant have dampened the global macroeconomic outlook, and we are starting to feel its impact in the states. Los Angeles County restored their indoor mask mandate, as they recorded 1,000 new cases each day for a week.  There is increasing concern about COVID and the Delta variant in the emerging markets where widespread vaccination is still a long way in the future.  The strong stock rally may be tested if further travel restrictions are implemented.  In addition, Chinese growth continues to show signs of struggling.  This week there may be a distinct “risk-off” mindset or a flight to safer securities in the global markets.  Many investors may begin to wonder if they can justify holding some stocks with stretched valuations if the economic recovery isn’t as robust as previously thought.  

Consumer inflation continues to run hot as supply bottlenecks and heavy re-opening demand push prices higher, pushing US core CPI in June up 5.4% YoY.  Higher inflation (and how temporary some price increases prove to be) will be primary concern as the Fed decides monetary policy in 2H 2021 and 2022.  Numerous economists say the Fed is miss-judging how persistent inflation will be, but there continue to be numerous experts on both sides of the inflation debate.  

This week is full of earnings with spotlights on Netflix, Coca-Cola, Johnson & Johnson, and Honeywell. United Airlines also reports which will provide insight to how travel has recovered. We will see if earnings can continue to beat expectations and push stocks higher despite inflation and COVID-19 fears.

Bill Ackman’s SPAC, Pershing Square Tontine Holdings, dropped its deal to buy 10% of Universal Music. Ackman sited issues raised by the SEC with several elements of the transaction for the reason of the drop and will now be pursuing a “conventional” SPAC merger. This shows that as SPACs keep arising, managers have been seeking unconventional deals, which might indicate the “good” conventional deals are few and far between.

Down Jones Index Returns through 7-16-21
 

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Previous Perspectives

Weekly Investment Perspective May 11, 2021

May 11, 2021
Despite an underwhelming employment report on Friday, U.S. equities edged higher last week driven by continued focus on reopening momentum and rising corporate earnings expectations amid strong first quarter results. For the week, the S&P 500 and Dow Jones gained 1.3% and 2.7% respectively, but the tech heavy Nasdaq Composite fell -1.5% as the rotation out of expensive, high-growth stocks into cyclical stocks leveraged to the economic reopening gained traction

Weekly Investment Perspective May 4, 2021

May 4, 2021
U.S. equity markets broadly moved sideways last week but closed out the month of April with the highest monthly gain since November amid a streak of strong earnings reports and continued signs of a robust U.S. economic recovery powered by stimulus and the vaccine rollout. The S&P 500 gained 5.3% for the month of April, bringing its year-to-date performance to 11.8%, while the Nasdaq Composite and Dow Jones advanced 5.4% and 2.8% for the month, respectively, with tech stocks retaking the lead on strong earnings results.

Weekly Investment Perspective April 27, 2021

April 27, 2021
Despite another strong week of corporate earnings announcements, U.S. equity markets took a pause from their year-to-date surge last week as market participants digested the announcement of President Biden’s proposal to increase the capital gains tax rate for high income households and monitored concerning global trends in Covid-19 cases. The major U.S. equity indices ended the week in the red but recouped most of their losses on Friday following robust economic data including indications of growing demand for the U.S. service sector and a 20% month-over-month increase in new home sales in March. The S&P 500 ended -0.1% lower for the week and the Dow Jones and Nasdaq Composite were down -0.4% and -0.3%, respectively.

Weekly Investment Perspective March 30, 2021

March 30, 2021
Despite an eventful week with a large segment of global trade stalled by a massive cargo ship stuck in the Suez Canal and the unwinding of an overleveraged hedge fund, equity markets broadly were undeterred with the S&P 500 and Dow Jones pushing to new all-time highs last week. Positive investor sentiment was aided by encouraging news on the vaccine rollout and the Federal Reserve’s decision to end restrictions on dividends and buybacks for U.S. banks.

Weekly Investment Perspective March 09, 2021

March 9, 2021
U.S. stock and bond markets had another bumpy ride last week as long-term interest rates continued to push higher on the back of robust vaccine and economic data and progress toward another round of stimulus, which was approved by the Senate over the weekend. For the week, the Dow and S&P 500 managed to post positive gains of 1.9% and 0.8%, respectively, as economically sensitive sectors like energy, industrials, and materials lifted the indices higher and offset weakness in information technology.