Monthly Market Recap: June 1, 2022

May Market Recap

June 1, 2022 

Zero-point-zero-one percent (0.01%).

That’s how much the S&P 500 gained last month. And to be honest, we’re rounding up. The official math was actually 0.005%. Is that something worth celebrating? Perhaps not. No one will be popping any champagne corks after reviewing their May 31 statements, but even the most modest of positive returns does represent a step in the right direction following April’s aggressive selloff.

Six of the 11 sectors in the S&P 500 moved higher in May, led by Energy (+15%) and Utilities (+3.8%). Five equity sectors booked losses. Of those, Real Estate (-5.1%), Consumer Discretionary (-4.9%), and Consumer Staples (-4.7%) performed the worst.

Index May 2022 YTD 2022
Dow +0.04% -9.21%
S&P 500+ +0.01% -13.30%
NASDAQ -2.05% -22.78%

High inflation and tighter monetary policy from the Federal Reserve remain the angry elephants in the proverbial room that investors are trying to navigate. As far as market obstacles, expect those two to remain at the top of the list for the foreseeable future.

Inflation actually slowed in May. The most recent Consumer Price Index revealed year-over-year inflation of 8.3%, lower than a month earlier (8.5%), but still higher than consensus estimates.

On May 4, the Fed raised its benchmark interest rate by 0.50% and announced plans to begin “passive tightening.” Beginning in June, the Fed will not reinvest the interest paid by its existing bonds and will not reinvest the principal from maturing bonds. A maximum of $95 billion per month will effectively roll off the Fed’s balance sheet.

More significantly, Fed Chair Jerome Powell said the Fed was “not actively considering” rate hikes as large as 0.75%. Equities initially took Powell’s comments as a positive. The Dow rallied 932 points (2.8%) on May 4. The S&P 500 and NASDAQ bounced even more. Those gains, however, did not last long. On the following day (May 5), the Dow fell 1,063 points (3.1%). The S&P lost 3.6%. The NASDAQ dropped 5%.

It’s the first time since March 2020 that US stocks delivered such whipsaw results on consecutive days. High volatility is certainly indicative of a bear market, and while the S&P has so far avoided a 20% peak-to-trough decline (if we’re sticking with end-of-day prices), it is basically semantics at this point.

Ignoring the Energy sector – up nearly 56% year-to-date thanks to skyrocketing oil prices – the S&P has already ventured well into bear market territory. The tech-heavy NASDAQ and smaller-cap Russell 2000 both lost more than 30% at their low points.

Everyone wants to know whether those mid-May lows represent “the bottom.” There’s no way to know for sure, but history is on our side in terms of forward-looking returns.

The first 100 trading days of 2022 (S&P -16.5%) make this one of the six worst starts to a calendar year since 1930. In the other five, US stocks were positive over the next seven months every time, with the S&P gaining 19% on average through year-end.

Equities did stage a significant rally in the final week of May. The S&P 500 increased 7% in those five trading days, its best week of the year. It also snapped a string of seven negative weeks in a row. Perhaps the tide is beginning to turn.

Bond prices also stabilized in the second half of May. 10-year US Treasury yields climbed as high as 3.17% on May 9 before reversing course and ending the month at 2.84% (slightly below the 2.89% yield from a month earlier). The major US bond benchmarks have lost roughly 10% year-to-date through May 31, though our individual bond ladders employed in Marks Group portfolios have held up much better.

The May 31 lifting of government-mandated lockdowns in China offered another glimmer of hope for investors.  The Chinese economy and global supply chains were severely disrupted following a spike in new COVID-19 cases and the resulting lockdowns.

International equities outperformed in May. Non-US Developed Markets (as represented by the MSCI EAFE Index) increased 2%. Emerging Markets gained 0.6%.

US mortgage rates hit their highest level since 2009. The rate on a 30-year fixed loan was 5.3% at month’s end, essentially double the rate from the low point in January 2021.

The US jobs report showed national unemployment remains exceptionally low at 3.6%.

Gasoline prices hit another record high with average costs of $4.69 per gallon, according to AAA. It’s now 50% more expensive to fill your car with gas than it was a year ago ($3.11 per gallon).

West Texas Intermediate Crude oil trades near $115 per barrel, up another 9.5% in May.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: May 2, 2022

April Market Recap

May 2, 2022 

It was an especially painful month for equity investors. Rather than attempt to sugarcoat that fact, we’ll do our best to put recent market movements in perspective and make sense of current financial conditions.

The S&P 500 lost 8.8% in April, its worst monthly performance since March 2020, when the COVID-19 pandemic blindsided the global economy. Last Friday alone, the Dow Jones Industrial Average fell 939 points (2.8%), the S&P dropped 3.6%, and the NASDAQ plummeted 4.2%. Ouch.

We took our family to Disney World over spring break, a trip that included a ride on the Twilight Zone Tower of Terror. Even with the experience of being on that same ride 25 years earlier, the violent series of ups and downs followed by a lengthy freefall at the end was hard to stomach.

That’s kind of how watching the stock market felt last month. Even when you’ve been through it before, corrections and volatility spikes are never fun.

Consumer Staples (+2.4%) was the only one out of 11 sectors in the S&P 500 to manage positive returns. Energy (-1.6%) also lost considerably less than the major indices. It was a much farther fall for Communication Services (-15.8%), Consumer Discretionary (-13%), and Technology (-11.3%).

Index April 2022 YTD 2022
Dow -4.91% -9.25%
S&P 500+ -8.80% -13.31%
NASDAQ -13.26% -21.16%

The S&P 500’s 13.3% loss through the first four months of 2022 makes this the worst start to a calendar year since the Great Depression. In the last 95 years, only 1932 (-28.2%) and 1939 (-16.8%) saw larger declines. 1942 (-11.9%) and 1970 (-11.4%) were also especially ugly.

Ready for the silver lining? After the awful starts in those four years, the S&P delivered average returns of +18.4% from May 1 through year-end.

The pair of elephants in the proverbial room impeding the path to better performance are Inflation and Tighter Fed Policy. Those are the same two obstacles, of course, that markets have been trying to circumnavigate all year. What changed in April was the Fed’s rhetoric becoming more aggressive.

The Fed minutes released on April 8 revealed that policymakers are strongly considering raising rates by 0.50% the first week of May (a 50-basis-point hike is now the consensus expectation). On April 21, Fed Chair Jerome Powell said “It’s appropriate to be moving a little more quickly (to raise interest rates).” Powell further clarified that taming inflation is “absolutely essential.”

Nine days prior to Powell’s comments, the Consumer Price Index (CPI) report showed inflation has risen to 8.5% (up from 7.9% in March). Evidence is building that year-over-year inflation may be nearing its peak. Once that happens, slowing inflation could be a catalyst for higher stock prices.

US Gross Domestic Product contracted by 1.4% (annualized) in the first quarter, an abrupt reversal following a year in which the American economy posted its most significant growth since 1984. More significant in our view, however, is that consumer spending remained strong, rising 2.7% from a year earlier.

Inflation tends to hurt growth stocks more acutely because future earnings are worth less in inflation-adjusted terms. The growth-heavy NASDAQ certainly proved more vulnerable last month. Its 13.3% decline in April was the NASDAQ’s worst month since October 2008.

Another unique aspect of this selloff is that bonds have performed nearly as bad as stocks. The 10-year US Treasury yield finished April at 2.89% (up from 2.33% a month earlier). It’s the largest monthly increase in bond yields in 12 ½ years (December 2009). The US Aggregate Bond Index has lost 9% year-to-date, although investors who own individual bond ladders are less exposed to those losses.

Not surprisingly, investor sentiment has grown especially negative. Recent surveys show nearly 60% of respondents are feeling bearish, the most pessimistic readings since February 2009. In contrarian terms, we view this as a positive indicator. The Feb. 2009 readings occurred just weeks before stocks bottomed during the Great Recession.

International equities lost less than US stocks in April in spite of the US dollar strengthening nearly 5% versus a basket of global currencies. Non-US Developed equities fell 6.7%. Emerging Markets were down 6.1%.

Gold prices declined 2% in April, but remain up 3.5% year-to-date.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: April 1, 2022

March Market Recap

April 1, 2022 

While the NCAA basketball tournament provided its annual dose of can’t-miss entertainment, stocks were able to survive and advance in what proved to be the best (and only positive) month this year for US equities.

Similar to a good March Madness game, it was hard to guess the finish based on the way things started. Momentum remained mostly negative in the first two weeks. When markets closed on March 14, the NASDAQ was 8.5% lower than it began the month. From there, it bounced 13% higher in 13 trading days.

When the dust settled, each of the three major equity benchmarks rose between 2-4% for the month. Ten of the 11 sectors in the S&P 500 were positive led by Utilities (+10.1%), Energy (+8.8%) and Real Estate (+7.3%). Financials (-0.4%) was the only sector to finish in the red.

Index March 2022 YTD 2022
Dow +2.53% -4.57%
S&P 500+ +3.58% -4.95%
NASDAQ +3.41% -9.10%

The trading week that ended on March 18 was the best week for US stocks since the November 2020 election. The NASDAQ gained 8.2% in that week alone. The S&P increased 5.6%, including four consecutive days with gains of 1% or more; only the fifth time ever that has happened.

Some of the recovery in equities can be attributed to the realization that the military conflict between Russia and Ukraine does not set the globe on an inevitable path to World War III, a popular (if far-fetched) concern a month ago as investors contemplated worst-case scenarios.

It’s probably also true that sentiment simply became too pessimistic. Consumer confidence readings in March were the lowest in 10 years. War, inflation, Fedwinds… Whatever your favorite brick in the latest wall of worry, fear and anxiety seemed to snowball until mid-March, which reminds us of Warren Buffett’s oft-cited investment advice to “be greedy when others are fearful.”

The rate of inflation continues to increase. The latest Consumer Price Index rose 7.9% from a year earlier and the spike in energy prices made worse by war-related supply chain disruptions seems likely to push inflation even higher this summer.

That provides the backdrop for Federal Reserve policy and Fed Chair Jerome Powell, who on March 16 announced a 0.25% rate hike and plans for seven hikes by year-end. It’s a delicate dance the Fed must choreograph to counteract inflation without triggering an economic recession, but it’s encouraging that the market responded favorably to Powell’s latest update. The S&P 500 increased 2.2% that day.

Bond yields jumped significantly in the last four weeks. The 10-year US Treasury yield finished March at 2.33%, compared to a 1.7% yield less than a month earlier. As yields increase, the price of existing bonds go down. It’s been a rocky start to the year for investors who own bond funds with the US Aggregate Bond Index down nearly 6% year-to-date.

Yield curve inversions tend to generate headlines because they are a well-known precursor to recessions. The 2-year vs 10-year Treasury curve inverted in March. Yes, it’s a potential warning, but not as simple as some folks would lead investors to believe. The last four times this occurred, equity prices did not peak until 17 months later.

If you’re a homeowner, feel free to celebrate the surge in home prices over the last 12 months. The Case-Shiller US Home Price Index shows an average annual increase of 19% in home prices. Residential real estate in Miami (+28%), Tampa (+31%) and Phoenix (+33%) saw the biggest jumps.

If you’re in the market for a new property or a hopeful first-time homeowner, the news isn’t so positive. In addition to inflated home prices, the cost of financing has risen substantially. 30-year mortgage rates have surged to 4.67%, nearly doubling the all-time low of 2.65% from January 2021. The amount of pending home sales nationally has fallen four months in a row.

Non-US Developed equities rose only 0.5% in March. Emerging Market equities fell 3.4%. While International stocks had outperformed US companies in January and February, their year-to-date losses now exceed the S&P 500 three months into 2022.

Oil prices increased another 5% in March, further fueling the recent gains in Energy stocks. Those gaudy year-to-date returns have not had much impact on the major benchmarks, however, given that Energy represents less than 4% of the S&P 500.

The US labor market added 431,000 jobs in March, which dropped the national unemployment rate to 3.6%. There are now 5.3 million more job openings in America than there are unemployed people (a new record).

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: March 1, 2022

February Market Recap

March 1, 2022 

A stock market already struggling to find its footing was dealt another blow in February.

Russian President Vladimir Putin’s unprovoked invasion of Ukraine not only lit the fuse on geopolitical tensions, it increased the blood pressure of investors around the world wondering how the conflict will affect the course of global financial markets in the year ahead.

Stock prices sank lower across the board last month, but were trending lower for most of February even before Russia’s build-up of military troops escalated into a full-scale war. Similar-looking losses for the major equity indices (all between 3-4%) are indicative of a selloff triggered more by macroeconomic developments than by company (or sector) specific news.

For the second consecutive month, 10 of the 11 sectors in the S&P 500 were negative. And for the second straight month, Energy (+6.4%) was the lone exception. Health Care (-1.1%) and Industrials (-1.1%) also outperformed. Communication Services (-7.0%), Real Estate (-5.1%), and Technology (-5.0%) suffered the largest losses.

Index February 2022 YTD 2022
Dow -3.53% -6.73%
S&P 500 -3.14% -8.23%
NASDAQ -3.43% -12.10%

The consequences of war can be exceptionally difficult to quantify.

Financially speaking, it was the details and depth of economic sanctions against Russia that drove market movements in the final week of February. The initial wave of sanctions, deemed less aggressive than expected, led to a relief rally on February 25. When stiffer sanctions from a larger coalition of allies were announced a few days later, stock prices sold off dramatically.

Russia is interesting in that it holds enormous political influence, is the largest country in the world by landmass, and (as a major supplier of oil to Europe) plays a serious role in global energy markets.

That said, the Russian economy represents less than 2% of global GDP. Italy’s economy is twice the size. Poland exports more goods to Europe than does Russia. That context is important when considering the expected impact of new economic sanctions on global supply chains, commodity prices, and revenue streams.

As of market-close on February 28, the S&P 500 had fallen 9.2% from its all-time high. The NASDAQ finished the month 15.2% below its highwater mark. Small-cap stocks outperformed in February. The Russell 2000 gained 1% for the month, but remains nearly 17% below its November 2021 high.

Expect the market’s focus to shift back toward the Fed in March when Jerome Powell formally announces the central bank’s first rate-hike of 2022. To be clear, high inflation and the expectation of rising interest rates remain far more significant to the market’s direction than the military conflict in Ukraine. One counterbalance of the recent weakness in equities is that the Fed will almost certainly avoid a larger 0.50% rate increase in March.

Valuations of US equities have already fallen considerably. Since the S&P 500’s all-time high in early January, its forward P/E ratio has fallen 14%. Valuations, in other words, have decreased even more than stock prices. In the final week of February, the S&P’s forward P/E (18.5) fell below its 5-year average for the first time since April 2020.

Year-over-year inflation accelerated to 7.5% in February (up from 7% a month earlier). Bond yields also reached their highest levels in 2 ½ years.  The 10-year US Treasury yield rose above 2% for the first time since July 2019 before retreating. The 10-year yield ended February at 1.84%.

Corporate earnings remain incredibly resilient. Blended earnings for S&P 500 companies rose more than 30% in Q4 2021, the fourth consecutive quarter in which earnings grew at least 30%.

As bonds yields move higher, so too have US mortgage rates. The average interest rate on a 30-year loan was just over 4% as of month’s end.

West Texas Intermediate Crude oil topped $100 per barrel in late February, the first time that has happened since 2014. It finished the month just under $96 per barrel.

With oil prices spiking, US gasoline prices rose to a national average of $3.61 per gallon.

Gold rose 6.1% to its highest price in 14 months.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: February 1, 2022

January Market Recap

February 1, 2022 

Whoever said “January is the Monday of months” certainly had it right about 2022.

The stock market’s opening act of the new year left its audience running for the exits. Sobering realities of 7% inflation and a Federal Reserve certain to implement less favorable monetary policy hit investors like a Minnesota wind chill. The S&P 500 lost 5.3%, its worst month since the pandemic panic of March 2020. It was the worst January performance for stocks since 2009, when the S&P fell 8.6%.

Volatility spiked as the selling intensified. The Chicago Board of Exchange Volatility Index (“the VIX”) reached its highest mark in a year. With that came extreme intraday swings. The average spread between the S&P 500’s daily highs and lows in January was 2.06%, more than twice the average daily spread last year (0.97%). Put another way, a “normal” trading day last month saw stocks fluctuate the equivalent of 730 Dow points.

All but one of the 11 sectors in the S&P 500 were negative. Consumer Discretionary (-9.7%) and Real Estate (-8.5%) lost the most. The only sector to finish positive was Energy (+19%), which delivered remarkable outperformance thanks in part to sharply higher oil prices. Financials (-0.1%) also weathered the storm relatively well.

Index January 2022 YTD 2022
Dow -3.32% -3.32%
S&P 500 -5.26% -5.26%
NASDAQ -8.98% -8.98%

If you’re looking for a silver lining, the good news is that equities finished the month on a high note. The S&P 500 gained 4.4% in the final two days of January. At its low point on January 24, the S&P had fallen 12.4% from its intraday peak in only 13 trading days.

The NASDAQ was battered even more, falling 17.4% over the same period and finishing January with a 9% loss overall. Dating back to the pandemic lows two years ago, mega-cap technology companies have been some of the market’s best performers. Many of those same companies proved especially vulnerable last month.

Consensus expectations on Wall Street suggest the Federal Reserve will raise interest rates five times in 2022. Perhaps Fed Chair Jerome Powell can successfully navigate these troubled waters, but it will require a delicate balance between staving off inflation and appeasing investors who have grown accustomed to historically friendly monetary policy.

It was the minutes (notes) from the Fed’s December meeting, released on January 5, that indicated a March hike was coming and sent stock prices southward. Joe Biden then applied some political pressure on January 19 when the President stated that fighting inflation is the job of the Federal Reserve. “Given the strength of the economy and the pace of recent price increases, it’s appropriate to recalibrate the support that is now necessary,” Biden said.

Year-over-year inflation clocked in at 7% in January, up from 6.8% a month earlier and the highest such reading since 1982. The national unemployment rate fell below 4%. When you consider the Fed’s official mandates to promote “maximum employment, stable prices, and moderate interest rates” it becomes obvious why a shift in policy is upon us.

If we look beyond inflation and the Fed, there are still reasons for optimism. The US economy grew at an annualized rate of 6.9% in the fourth quarter. On an inflation-adjusted basis, American GDP grew 5.7% overall last year, the strongest annual growth since 1984.

Corporate earnings also continue to impress. With roughly one-third of S&P 500 companies already reporting, fourth-quarter earnings are on pace to increase 24% from a year earlier. If we hit that mark, it will be four consecutive quarters with earnings growth of 20% or more.

10-year US Treasury bonds finished January yielding 1.78%, the highest in two years. It was summer 2019 when 10-year Treasuries last eclipsed 2%, a threshold that holds symbolic significance and could provide short-term resistance.

Higher bond yields are not just an American trend. The 10-year German bund yield ended January above 0% for the first time since May 2019 (no, that’s not a typo). The 10-year Japanese Government Bond also rose to a five-year high.

International equities outperformed US stocks in January. Non-US Developed equities (measured by the MSCI EAFE Index) fell 3.6%. Emerging Market stocks, which lagged far behind US stocks in 2021, were flat.

West Texas Intermediate Crude oil jumped more than 17% last month. That corresponded with a 15% increase in US gasoline prices, which now average $2.55 per gallon nationally. Gold prices fell 1.7%.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: January 3, 2022

December Market Recap

January 3, 2022

As we look ahead to a new year, most Americans are probably hoping 2022 will have very little in common with 2021. Spending almost two years under the suffocating weight of a global pandemic makes that understandable. Yet, as far as investors are concerned, most would gladly take more of the same.

The US stock market wrapped up 2021 on a familiar path… Trending higher. The S&P 500 and Dow Jones Industrial Average both finished the year within 1% of their all-time highs thanks to December returns above 4% and 5%, respectively. The vast majority of those gains came in the final 11 days of the year. The NASDAQ gained less than 1% last month and ended 3.5% below its highwater mark.

Ten of the 11 sectors in the S&P 500 delivered positive performance in December. Consumer Staples (+10%), Real Estate (+9.7%), and Utilities (+9.4%) led the pack. Only Consumer Discretionary (-0.3%) finished in the red.

Index December 2021 YTD 2021
Dow +5.38% +18.73%
S&P 500 +4.36% +26.89%
NASDAQ +0.69% +21.39%

On its way to a 27% calendar year return in 2021, the S&P 500 closed at a new all-time high an astonishing 70 different times. That’s the second most ever. Only 1995 had more (77).

While the momentum remained positive for the vast majority of the year, equities began December with a bit more uncertainty. Stocks had been negative in two of the previous three months (September, November) and investors were still making sense of a steep Omicron-induced selloff.

Equities moved higher in the first week of December before facing some mid-month volatility. Some of that may have been rekindled COVID concerns, but more was due to the latest developments from the Federal Reserve.

On December 15, the Fed released a statement announcing its intention to quicken the pace of its tapering. That is to say, reducing economic stimulus twice as fast as Fed Chair Jerome Powell originally suggested. The accelerated schedule puts the Fed on pace to eliminate bond buying and begin hiking interest rates in the second quarter of 2022.

The S&P 500 sold off 4% in the three days after that news, but it was all positive from there. Stock prices surged significantly from December 21 through year-end. In hindsight, it looks like a somewhat predictable Santa Claus rally. Some years, perhaps all you need to do is believe.

As good as 2021 was for equities, it was an ugly year for bonds. The Bloomberg Barclays Aggregate Bond Index lost 1.7% for the year. In its 46-year history, the index has only registered a negative calendar year return three other times, most recently in 2013. 10-year US Treasury yields, specifically, ended the year at 1.51% (up from 1.44% a month earlier). Treasury yields started the year at 0.92%. Rising interest rates, as most investors know, have a negative impact on the performance of bonds.

Inflation, obviously, is what’s causing interest rates to increase even though the Federal Reserve has delayed any official change to its benchmark Fed Funds rate. The latest Consumer Price Index (CPI) data showed annual inflation of 6.8%, the highest reading of 2021 (and the highest in nearly 40 years).

 Gasoline prices alone have spiked 58% in the last 12 months. Wages have increased 4.8% over the same period, meaning the cost of living (after inflation) for an average American family is becoming more expensive. If that sounds worrisome be thankful at least you don’t live in Turkey, where a full blown financial crisis includes year-over-year inflation of 36%!

International equities lagged US stocks for the year. Some of that is due to China, where slowing growth and a rash of regulatory crackdowns have hindered the world’s second largest economy. Part of the underperformance is also due to the US dollar strengthening roughly 7% last year versus global currencies.

Non-US Developed equities gained 4.4% in December and 15% for the year. Emerging Markets grew 1.5% in December, but still lost roughly 2% in 2021.

Gold prices increased 3.3% in December.

Here’s to a prosperous year for you and your portfolio in 2022.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: December 1, 2021

November Market Recap

December 1, 2021

November didn’t end nearly as well as it began.

What started as another benign month with stocks drifting gently upward the first three weeks took a sudden turn for the worse. With Thanksgiving dinner still digesting and Black Friday bargain hunting in full force, stock prices sank significantly lower on November 26.

The Dow lost 905 points that day, due in large part to news about the latest COVID-19 variant – Omicron – and growing concern about how another wave of illnesses might slow the global economic recovery. If nothing else, it was a reality check that this pandemic is not yet over.

For the stock market, November was essentially three baby steps forward followed by a faceplant. Only two of the 11 sectors in the S&P 500 finished positive. Technology (+4.2%) seemed to benefit for the same reasons it did in 2020 (think: “Stay at home stocks” will weather pandemic problems better than most). Consumer Discretionary (+1.9%) also delivered monthly gains. Energy (-5.8%), Financials (-5.8%), and Communication Services (-5.2%) were dealt the biggest losses.

Index November 2021 YTD 2021
Dow -3.73% +12.67%
S&P 500 -0.83% +21.59%
NASDAQ +0.25% +20.56%

The relative outperformance of Technology companies allowed the NASDAQ to finish slightly positive last month and helped the S&P 500 lose less than 1%. Those numbers hide a more violent selloff in other areas of the market. All of the Dow’s 3.7% loss came in the final three trading days of November. Energy stocks lost 5.7% in the same 3-day period. Financials dropped 5.3%. Small-cap stocks (measured by the Russell 2000) fell 5.7%.

The discovery of Omicron in South Africa came after Austria initiated a nationwide lockdown earlier in November. Germany said it would consider similar measures. The volatility wasn’t entirely pandemic-driven, however. On November 22, Joe Biden announced his intent to re-nominate Jerome Powell to serve a second term as Chair of the US Federal Reserve, meaning Powell will maintain in that role for another four years.

Markets reacted favorably to the news, but with new job security in hand, Powell signaled the Fed may speed up its plan to reduce stimulus. In comments made to the Senate Banking Committee on November 30, Powell said the Fed may accelerate the tapering of its bond purchasing faster than the formal timeline announced four weeks earlier. Powell’s sudden willingness to become less dovish led the Dow to drop another 652 points.

Inflation, of course, is what’s behind the need for Powell and the Fed to adjust their policy. The latest data shows American consumer prices jumped 6.2% from a year ago, the most significant inflation in 30 years. The year-over-year rate of inflation had been 5.3% a month earlier. Powell is finally acknowledging these trends are not so transitory after all.

Oil prices surged 12.3% from September to October, which led to the US government’s decision last month to release 50 million barrels from our country’s strategic oil reserve. It’s a tool meant to increase supply and reduce prices. And it worked. After oil (and gasoline) prices had more than doubled in the previous 12 months, crude oil prices fell 21% in November. West Texas Intermediate Crude finished the month just above $66 per barrel (down from nearly $84 per barrel a month ago).

Bond yields initially climbed in November before retreating. The 10-year US Treasury yield got as high as 1.67% on November 22, then fell to 1.44% as equities sold off. Gold lost 0.7% in November.

The federal government’s long-awaited infrastructure package was officially signed into law last month. $1.2 trillion in spending will be allocated toward traditional infrastructure improvements (roads, bridges, airports, Internet access, etc.). A separate bill related to “human infrastructure” is still being debated in Congress.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: November 1, 2021

October Market Recap

November 1, 2021

October has a reputation for being an especially bad month for stocks. The market’s crash in October 1929 helped spur the Great Depression. Black Monday in October 1987 remains the single-worst day in the history of the Dow Jones Industrial Average (-22.6%). Even last year proved to be relatively ugly. October 2020 brought the Dow’s largest monthly loss (-4.6%) of this latest bull market.

That history makes it especially notable that this year, October brought one of the strongest months in the last decade. The S&P 500 gained 6.9% last month. Only five times in the last 10 years have we seen a better month for US stocks.

All 11 sectors in the S&P 500 were positive. Consumer Discretionary (+10.9%) and Energy (+10.2%) recorded the most significant increases. Communication Services (+2.6%) and Consumer Staples (+3.7%) booked the most modest gains.

Index October 2021 YTD 2021
Dow +5.84% +17.03%
S&P 500 +6.91% +22.61%
NASDAQ +7.27% +20.25%

We’ve been reminding clients for much of the year that corporate earnings would face a higher bar late in 2021 once year-over-year growth was no longer being measured against pandemic-era figures. We have now reached that point, and yet earnings continue to exceed consensus expectations, even though the pace of growth has slowed.

Midway through third-quarter earnings season, 82% of reporting companies have beaten profit projections. Cumulatively, S&P 500 companies are on pace to grow by 37% from a year earlier. While the jukebox volume might be slightly lower, the hits keep right on playing.

Stocks responded by climbing to record levels. All three major US equity indices finished October at or near all-time highs.

A disappointing GDP report from the Bureau of Economic Analysis hardly dampened the enthusiasm. Initial numbers suggest the U.S. economy grew at an annualized rate of 2% in the third quarter, down from 6.7% annualized in Q2 and the slowest such increase of the post-pandemic recovery.

Recent economic growth was stronger in Europe. The 19-nation eurozone (those countries using the euro as their currency) grew at an annualized rate of 9.1% in the third quarter, boosted by the lifting of COVID-19 restrictions that have remained generally more rigid than in the US.

Headlines out of Washington point toward the eventual government infrastructure deal having a smaller scope and lower pricetag than originally thought. As politicians haggle over how to pay for the spending, proposed increases to personal tax rates, corporate tax rates, and capital gains rates have all been met with strong resistance. Major changes appear unlikely.

10-year Treasury yields climbed to 1.7% on October 22, a six-month high, before retreating to 1.56% at month’s end. Rising yields are an acknowledgment of higher inflation, which remains stubbornly elevated despite insistence by some that higher prices are merely “transitory.” The latest Consumer Price Index (CPI) data showed annual inflation of 5.4%, the fifth month in a row with a reading of 5% or more.

The Federal Reserve keeps inching toward a tapering of its stimulus (meaning “less bond buying”) by year-end, although no significant changes occurred in October. Fed Chair Jerome Powell and Co. are expected to announce more details in the coming days.

Oil prices rose steadily in October, moving higher for 10 weeks in a row to their highest level since 2014 before finally booking a weekly decline late in the month. West Texas Intermediate Crude finished October at $83.57 per barrel (compared to $37 per barrel a year ago). The average price of gasoline in America is now $3.40 per gallon, meaning it costs just under $60 to fill up the tank in an average sized vehicle.

Small-cap stocks underperformed in October. The Russell 2000 gained 4.2% last month and remains below its mid-March peak. International equities also lagged, relatively speaking. Non-US Developed Markets increased 3.2% in October. Emerging Markets returned just 1.1%.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: October 1, 2021

September Market Recap

October 1, 2021

Anybody out there remember what a down-month feels like?

September snapped a 7-month winning streak for US equities as the S&P 500 finished lower than it began for the first time since January. The Dow, S&P, and NASDAQ all lost at least 4% in a broad-based selloff from recent highs.

Something to keep in mind as investors prepare to view September 30 statements: It’s the first time all year the S&P 500 has fallen as much as 5% from its highwater mark. Since 1980, the average peak-to-trough correction during each calendar year is 14.2%. Compared to the rest of 2021, September was disappointing. Compared to an average year, it barely qualifies as a selloff at all.

Only one of the 11 equity sectors in the S&P 500 moved higher last month. Energy (+9.3%) gets the blue ribbon for September performance. Financials (-2.0%) also held up better than most. Five sectors lost 6% or more, with Materials (-7.4%) and Real Estate (-6.6%) being the worst of those.

Index September 2021 YTD 2021
Dow -4.29% +10.58%
S&P 500 -4.76% +14.68%
NASDAQ -5.31% +12.11%

Some of the blame for September stock losses can be attributed to the fact we were just overdue for a pullback. Even then, there’s always news that spurs the selling. One event was the financial failing of Chinese real estate developer Evergrande, one of the 500 largest companies in the world (based on revenue) whose rapid growth in recent years was fueled by massive leverage.

The company reportedly has $300 billion of debt and is unable to make good on its loan payments. We’re still waiting to find out whether the Chinese government may bail out Evergrande in some capacity, but considering real estate and related industries make up as much as 30% of Chinese GDP, you can see why global markets are paying attention.

The US government’s debt ceiling is back in the headlines, something that happens every few years and inevitably contributes to short-term market volatility. The game of political football resumed in September, which led to threats of government shutdowns and “economic catastrophe” if Congress does not vote to legally increase the amount of debt our country is allowed.

Congress has increased America’s debt limit 14 times since 2001, never failing to do so despite a wide variety of political environments and party majorities. It will do so again. The only real questions are when, by how much, and whether it is done with bipartisan support.

Stubbornly high inflation is no longer a trend that should catch anyone by surprise, but those investors looking for an excuse to sell can still point toward rising costs for both businesses and consumers.

Crude oil prices rose nearly 10% in September and are higher than at any point in the last five years. Steel prices have more than tripled in the last 12 months. Lumber costs, which have fallen considerably since May, increased 20% in September.

The latest Consumer Price Index (CPI) inflation gauge rose 5.3% from a year earlier. That’s down from the 5.4% year-over-year increase reported in August. So while the pace of inflation is slowing, costs are still increasing. A steadily falling unemployment rate (5.2% nationally) and a glut of “Help Wanted” signs suggest the economy is strong, but rising wages will promote inflation as well.

There was speculation the September Federal Reserve meeting could result in the first tapering of stimulus since COVID hit. That proved premature as Fed Chairman Jerome Powell announced no policy changes. Powell’s previous comments made clear the Fed intends to cut back its asset purchasing prior to year-end. The “not yet” speech was well-received by stocks as the Dow gained more than 338 points on September 22.

Another Fed development worth tracking is how long Powell himself will remain in charge. His term expires early next year and it’s not yet clear whether Joe Biden will reappoint or replace him. Powell’s term has generally been viewed favorably, but a bloated Fed balance sheet, higher inflation, and the recent resignation of two Fed officials (for perceived conflicts of interest) mean it’s no sure thing Powell will keep his job.

The 10-year Treasury yield began September at 1.3% but rose all the way to 1.53% by month’s end. That increase hurt the returns for bond investors, who had benefitted from steadily falling yields since March.

Small-cap stocks fell at a similar rate to their large-cap cousins with the Russell 2000 losing 3% last month. Non-US Developed equities were down 3.3% in September. Emerging Markets fell 3.9%.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: September 1, 2021

August Market Recap

September 1, 2021

The S&P 500 did not finish the month of August at an all-time high. Based on the way US equities have traded this summer, that statement is actually newsworthy.

Stocks are lingering just below their high-water mark, and the market’s pace of gains remained on cruise control last month. As Labor Day approaches, the S&P has now risen for seven months in a row. It’s the longest such streak since a 10-month run ending in December 2017. Through the first eight months of 2021, the S&P has closed at a new all-time high on 53 different occasions.

Ten of the 11 equity sectors finished higher in August, led by Financials (+5.0%) and Communication Services (+5.0%). Energy (-2.9%) was the only sector to post a monthly loss.

Index August 2021 YTD 2021
Dow +1.22% +15.53%
S&P 500 +2.90% +20.41%
NASDAQ +4.00% +18.40%

August 16 brought another milestone for this bull market. On that date, the S&P 500 officially doubled off its pandemic low (March 2020). It took less than 17 months, in other words, for stocks to rise 100%. That is the fastest the S&P has doubled since World War II. Major selloffs have been few and far between. The S&P has not fallen as much as 5% even once in 2021.

The US housing market is on an incredibly strong run of its own. The latest Case-Shiller data shows that every major metropolitan area in the country experienced double-digit increases in home prices over the last 12 months. West coast cities Phoenix (+29%), San Diego (+27%), Seattle (+25%), and San Francisco (+22%) saw the largest gains. Nineteen of America’s 20 largest cities show home prices at all-time highs (Chicago being the lone exception).

The Federal Reserve’s annual economic gathering in Jackson Hole, Wyoming, took place in late August. Previously referred to as a “summit,” the event seems to have been rebranded as a “symposium.” As far as changes announced by the Fed, that was arguably the most significant. From a policy perspective, Chairman Jerome Powell (again) confirmed the Fed is NOT ready to reduce its asset purchasing and NOT ready to increase interest rates.

That familiar stance, however, caused a more noticeable market reaction than in previous months. The Dow closed 243 points higher on the day of Powell’s speech, which demonstrates equity markets had already been pricing in expectations of Fed tapering. Powell did indicate a reduction in the Fed’s bond buying is likely to occur before year-end. Markets still suggest no rate hikes are likely until 2023.

Small-cap stocks climbed higher in the final week of August, though monthly gains for the Russell 2000 (+2.1%) were mostly in line with larger-cap benchmarks. The Russell remains slightly below its record high set in March.

The trend of higher inflation continued last month. The Fed’s preferred inflation metric, the “personal consumption expenditure price index,” rose 0.4% from a month earlier. The PCE index’s 4.2% year-over-year increase shows the most significant inflation since 1991.

Despite the steady gains in stock prices, consumer confidence fell sharply in August to its lowest level since February. Concerns about increased cases of the Delta COVID variant and the reality of higher inflation seem to be the primary culprits.

Oil prices surged 10% in the last full week of August trading. West Texas Intermediate Crude finished the month at $68.50 per barrel. That’s 7.4% lower than a month earlier, a decline that contributed to the underperformance of energy stocks. On the bright side, a new government report showed domestic demand for oil climbed to its highest level since the start of the pandemic.

The 10-year US Treasury Bond yielded 1.3% as of August 31, up slightly from its 1.24% yield at the end of July.

The latest employment report from payroll services company ADP indicated fewer jobs than expected were created in August, but there seems to be plenty of work for those who are still looking. As of mid-August, there were more than 10 million job openings nationwide. That’s more than the total of unemployed working-age Americans. The government’s August jobs report will be released on September 3.

 

 

 

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