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.

 

 

 

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: August 2, 2021

July Market Recap

August 2, 2021

It was a relatively quiet month by modern market standards as the major US equity benchmarks rose modestly in July. Stocks generally began the second half of 2021 right where they left off thanks to yet another round of strong corporate earnings. The S&P 500 ticked higher for the eighth time in the last nine months (January was the lone exception). That said, there was some definite thrashing below a mostly calm surface.

The Chinese government imposed a shock to the financial system when it announced raft of regulatory crackdowns against publicly-traded Chinese companies. So far, the shockwaves have remained mostly contained to Emerging Markets, but investors can probably expect more ripple effects given the size of China’s economy.

Nine of the 11 sectors in the S&P 500 delivered gains in July with Health Care (+4.7%), Real Estate (+4.6%), and Utilities (+4.2%) recording the best returns. Energy (-8.4%) and Financials (-0.6%) were the only sectors to move lower.

Index July 2021 YTD 2021
Dow +1.25% +14.14%
S&P 500 +2.27% +17.02%
NASDAQ +1.16% +13.85%

July began with a better than expected employment report showing 850,000 new jobs created, with 40% of those in travel/leisure and hospitality, the industries hit hardest during the pandemic. The unemployment rate, nationally, remains just under 6%.

Consumer spending was also unexpectedly positive. Retail sales grew 0.6% in the most recent batch of monthly data, compared to a 1.7% decline in spending the previous month. Consumer spending is now higher than pre-pandemic levels. Initial estimates suggest GDP grew around 6.5% in the second quarter, below most economists’ expectations.

With nearly 300 of the companies in the S&P 500 companies having reported second quarter earnings as of July 31, almost 90% have beaten consensus estimates. Cumulatively, S&P earnings have grown 85% compared to a year earlier, with the obvious caveat that second quarter 2020 included the darkest period of last year’s pandemic-induced shutdown.

For one day at least, the market showed renewed concerns that rising cases of the delta COVID variant could derail this economic recovery. US stocks opened sharply lower on July 19 and the Dow flirted with a 1,000-point decline. It finished the day 729 points in the red (-2.1%), the worst daily performance since October 2020. Those losses were quickly erased, however, as equity prices recovered most of that slide the following day. The buy-the-dip mentality remains as strong as ever.

The Federal Reserve held its regularly scheduled meeting in late July but the comments afterward demonstrated no departure whatsoever from previous statements. Fed Chair Jerome Powell was plainspoken in his summary of the Fed’s current approach: “The Fed is nowhere near considering raising rates,” Powell said on July 28.

While the Fed’s friendly policy framework has allowed US stocks to continue churning higher, the opposite was true in Emerging Markets last month. The Chinese government asserted new policies in July designed to curb the growth in certain technology industries, Internet platforms, and education/tutoring. Propaganda has suggested these restrictions are being implemented in the name of “national security,” but the announcements had some eye-popping effects.

China’s two largest companies, Alibaba and Tencent, offer a glimpse of how investors reacted to the news. Alibaba fell more than 20% from its June 30 closing price before a modest rebound in the final few days of July. Tencent fell more than 25% over the same period. Those losses are roughly equivalent to what Apple and Google shareholders experienced in February and March 2020, when the realization of a global pandemic shook equity prices.

China makes up roughly one-third of the MSCI Emerging Markets Index, which fell 6.4% last month. It will be interesting to see if capital continues to flee from the world’s second-largest economy or if, in hindsight, this will represent a buying opportunity. For now, it’s too early to tell.

Small cap stocks also underperformed in July. The Russell 2000 Index dropped 3.7%. Bond yields continued to sink. 10-year Treasury yields finished the month at 1.24%, compared to 1.44% a month earlier. Gold prices rose 2.5%. Oil closed July relatively close to where it began, near $74 per barrel, although West Texas Intermediate Crude fell to $66 mid-month.

 

 

 

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: July 1, 2021

June Market Recap

July 1, 2021

Tech stocks are back!

You may not have noticed with the major stock benchmarks climbing steadily higher, but Technology had significantly underperformed through the first five months of the year. As of May 31, Tech’s year-to-date return ranked ninth out of 11 equity sectors in the S&P 500. That all changed in June.

Technology gained 6.9% last month and in doing so dragged the S&P to another positive monthly return. It’s now seven of the last eight months in which the benchmark index has risen higher. The NASDAQ surged 5.5% in June. The Dow was essentially flat.

Tech’s resurgence bucked one of the major financial trends of 2021; the rotation away from popular “stay at home stocks” (Tech was the best performing sector in 2020) toward more cyclical companies positioned to benefit more in a broad-based economic recovery.

Another trend – the steady increase in oil prices – remained very much intact and helped Energy (+4.5%) post the second-best sector performance in June. Crude oil prices have risen for five weeks in a row and have more than doubled since late October.

Five equity sectors were down last month with Materials (-5.5%) and Financials (-3.1%) struggling most.

Index June 2021 YTD 2021
Dow -.0.08% +12.73%
S&P 500 +2.22% +14.41%
NASDAQ +5.49% +12.54%

There’s something to be said for positive momentum. As has been the case for most of the year, it was more escalator than roller coaster for stock investors last month and that remains the case entering July as the S&P 500 finished June on a 5-day winning streak (five consecutive “up days”).

With the path of least resistance clearly leading stocks higher, focus has intensified on the potential disruptors that could stunt the rally. Most agree that inflation and less favorable Fed policy are the two most likely suspects.

The latest batch of inflation data released on June 10 was again hotter than consensus estimates. The Bureau of Labor Statistics’ consumer price index accelerated 5% compared to a year earlier. The previous monthly reading clocked in at 4.2%. Those like Federal Reserve Chairman Jerome Powell who have preached that inflation will be “transitory” may ultimately prove correct, but the pressure to act is still increasing for now.

Hyper-focus on the Fed caused the most noticeable selloff in stocks last month. The Dow fell 3.5% the week ending June 18, when Powell said the central bank was considering tapering its $120 billion per month of bond purchases. Every word tends to get scrutinized when it comes to “Fedspeak,” but it should be noted that no specific timetable was given as to when such tapering could occur.

Markets suggest any increases to the Fed Funds rate remain at least 18 months away (in 2023) and Powell’s track record makes it clear that not disrupting markets is a top priority. With that in mind, investors’ main takeaway should be that no significant policy changes are imminent. When the Fed does eventually get less dovish, any adjustments will more than likely be implemented at a snail’s pace.

The US dollar also spiked in the wake of Powell’s comments, while gold prices fell. Overall, gold decreased 7% in June. Bonds yields generally have been on a slow but steady decline since late March. Treasury yields finished June at 1.44% (down from 1.58% a month ago).

International stocks lagged a bit in June. Emerging Markets gained 1% but Non-US Developed equities fell 1.1%. Small-caps, meanwhile, had another solid month. The Russell 2000 increased 1.8% in June. Its 17% gain year-to-date is better than the S&P 500, Dow, and NASDAQ.

For those tuned in to political drama, it’s been a relatively sleepy summer in Washington thus far. President Biden did announce agreement with a bipartisan group of Senators related to $1 trillion of infrastructure spending, but the plan has yet to be approved by Congress and the water remains muddy for now as to what the final legislation will look like.

 

 

 

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: June 1, 2021

May Market Recap

June 1, 2021

Sometimes, “boring” is what investors need most.

The stock market was short on surprises in May as most of the recent financial trends remained in place. The final few weeks of quarterly corporate earnings continued to exceed consensus estimates. The latest economic data painted the clearest picture yet that inflation is taking hold. And, thankfully, the progress Americans have made toward national vaccination goals led to fewer restrictions and more consumer spending.

The S&P 500 drifted slightly higher in May, the sixth time it has done so in the last seven months (ho-hum). The Dow posted the best performance of the three major equity benchmarks. The NASDAQ fell 1.5%, although Growth stocks actually outperformed Value in the final two weeks of the month.

Seven of the 11 sectors in the S&P 500 booked gains in May, led by Materials (+5%), Energy (+4.9%), and Financials (+4.7%). Consumer Discretionary (-3.9%) and Utilities (-2.8%) performed the worst.

Index May 2021 YTD 2021
Dow +1.93% +12.82%
S&P 500 +0.55% +11.93%
NASDAQ -1.53% +6.68%

If anything caught the market by surprise in May, it was the latest jobs report. The US economy added 266,000 jobs in April, nowhere near expectations of 1 million or more.  Many placed the blame for slower job growth on a shortage of workers and supply-chain bottlenecks. The national unemployment rate ticked higher to 6.1%.

Relative to expectations, corporate earnings have rarely been better than they are right now. More than 85% of S&P 500 companies beat consensus earnings-per-share forecasts in the first quarter, the highest percentage since data research firm FactSet began tracking the information in 2008.

The most-cited inflation gauge, the Consumer Price Index (CPI), has increased 4.2% from a year ago. That’s the fastest rate of inflation in more than 12 years.  A separate measurement of inflation tracked closely by the Federal Reserve (the core personal consumption expenditures index) has risen 3.1% year-over-year, well above the Fed’s 2% target.

At this point, accelerating inflation is undeniable. It remains up for debate whether such forces will be “transitory,” as Fed Chair Jerome Powell suggested, or turn out to be stickier. So far, financial markets have digested the reality of inflation without much incident, a sign perhaps this has been long expected.

The steady stream of data revealing meaningful inflation finally jumpstarted gold prices, which gained nearly 8% last month. Gold had remained stubbornly low for much of the year, causing some to wonder whether cryptocurrencies had taken its place as a true inflation hedge.

The theory of crypto as “digital gold,” however, failed a major litmus test last month. Bitcoin fell 35% in May amid speculation of looming government regulation.

National efforts to vaccinate Americans against COVID-19 have led to real progress. The daily US death rate (7-day average) fell below 500 last month. In 22 states, more than 65% of the adult population has received at least one dose of the vaccine.

With a growing number of people vaccinated, numerous states have lifted mask mandates and eased social distancing guidelines. Better public health and fewer restrictions both lead directly to a stronger economy.

We got relatively few developments in political negotiations surrounding President Joe Biden’s proposed infrastructure spending. Biden has suggested increasing both the long-term capital gains rate (on Americans earning more than $1 million per year) and bumping the highest marginal income tax rate back to 39.6% (from 37% currently), though neither elicited much change from Republicans.

Small-cap stocks were mostly flat as the Russell 2000 returned 0.1% in May. International equities outperformed, especially Non-US Developed Markets, which gained 3.5%. Emerging Market equities were up 1.7%.

Crude oil prices finished the month just below $67 per barrel, their highest mark since October 2018.

10-year US Treasury yields stayed steady, closing the month little changed at 1.58% (compared to 1.63% a month earlier).

 

 

 

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: May 3, 2021

April Market Recap

May 3, 2021

The buy-the-dip mentality that has become ever more popular among investors in these bullish of times is getting more difficult. The dips have disappeared.

Out of 21 trading days in April, the S&P 500 rose 12 times. Of the nine “down days,” none approached as much as a 1% drop and only three recorded losses of at least 0.5%. Only once did the S&P fall on consecutive days (April 19-20).

It all added up to gains north of 5%, while the NASDAQ finished with similar monthly returns (for a change). The Dow Jones Industrial Average rose about half as much. All the major US stock indices hit record highs in April before trading mostly sideways in the final two weeks.

Consumer Discretionary stocks booked the largest gains of any S&P sector, rising 8.8%. Communication Services (+7.9%) and Real Estate (+7.1%) also posted large increases. Energy (-1.3%) was the only sector to finish lower, but remains the best-performing sector year-to-date. Consumer Staples (+0.4%) also lagged.

Index April 2021 YTD 2021
Dow +2.71% +10.68%
S&P 500 +5.24% +11.32%
NASDAQ +5.40% +8.34%

Corporate earnings are back in the spotlight and the results so far have lived up to the considerable hype. As of month-end, roughly 60% of S&P 500 companies had reported first-quarter results and nearly 90% of those beat consensus earnings estimates. Cumulatively, earnings have grown 46% compared to a year ago when the same companies were reporting in the midst of a global economic shutdown.

Strong earnings, a strong US consumer, and the tsunami of liquidity unleashed by the Federal Reserve continue to stoke inflationary pressures. As measured by the Consumer Price Index, the pace of inflation has reached its highest level in 2 ½ years, showing a year-over-year increase of 2.6%.

Inflation is especially evident in commodity prices. Crude oil rose 7.5% in April. Copper, steel, and natural gas all gained more than 10% last month. Lumber prices are at all-time highs with futures contracts trading roughly four times above their typical price at this time of year. On the Chicago Mercantile Exchange, lumber prices have risen by the daily maximum allowed in nine of the last 17 trading days.

Jerome Powell and the Fed, however, have shown no signs of adjusting dovish monetary policy. In late April, Powell struck a familiar tone in referring to inflation as temporary and reiterating the Fed’s current pace of asset purchasing is appropriate.

It’s no surprise the Fed remains exceptionally accommodative, but it also begs the question, “If central banks don’t raise interest rates or taper liquidity in times of economic strength, when will they?”

American GDP rose at a seasonally adjusted rate of 6.4% in the first quarter. Weekly unemployment claims have fallen to their lowest levels since the pandemic took hold in early 2020.

The only news that seemed to upset markets in April were reports that the Biden administration could double capital gains rates paid by Americans with taxable income over $1 million. That triggered an intraday selloff in equities that proved temporary. Even if such a change were to be implemented, it would not represent a major hurdle for market momentum, in our view.

Small-cap stocks, as measured by the Russell 2000 index, slowed their roll a bit, gaining “only” 2.1% in April. The index has gained nearly 15% through the first four months of 2021.

International equities also lagged last month. The MSCI EAFE index of Non-US Developed economies rose 3%. Emerging Markets increased 1.2%, though it’s notable that China reported first-quarter GDP growth of 18.3% from a year earlier.

US 10-year Treasury yields finished at 1.63% (compared to 1.75% a month earlier). Gold prices increased 3.6%.

The battle to vaccinate the country against COVID-19 hit a speed bump in April when the US Food and Drug Administration temporarily halted the use of Johnson & Johnson’s single-dose vaccine. The pause was lifted weeks later after it was determined rare cases of blood clots posed no serious threat to the public.

 

 

 

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: April 1, 2021

March Market Recap

April 1, 2021

Some anniversaries are easier to remember than others.

March 23 is a significant one. It marks the date of the bear-market bottom established one year ago, when the S&P 500 had fallen 35% and COVID-19 was still new to our vocabulary.

You would have been laughed out of your local investment club (or your first Zoom happy hour) at the time for suggesting stocks were on the verge of a 70% rally in the year to come. And yet 12 months later, this is where we are.

Better than 70% actually if we include gains from the final week of March. The S&P finished the first quarter of 2021 on the verge of hitting 4,000 for the first time. The Dow Jones Industrial Average recently eclipsed 33,000. And the NASDAQ, despite cooling its jet-like acceleration in recent months, has nearly doubled from its March 23, 2020 low.

In a complete reversal from a year ago, every one of the 11 sectors in the S&P 500 moved higher in March. Utilities (+10.5%) and Industrials (+8.9%) climbed the most. Technology (+1.7%) was the worst performer as a rotation out of high-valuation growth names continued. Energy (+2.8%) also lagged last month, though it remains the best-performing sector year-to-date.

Index March 2021 YTD 2021
Dow +6.62% +7.76%
S&P 500 +4.24% +5.77%
NASDAQ +0.41% +2.78%

Bonds rarely get top billing in these summaries, but inflation concerns and rising interest rates have become more significant drivers of stock prices in recent months. 10-year Treasury yields continued to surge higher in March, reaching 1.75% (compared to 1.46% a month earlier). As recently as New Years Eve, those yields were below 1%.

The move is rooted in expectations of especially strong economic growth. The Federal Reserve in March boosted its growth outlook for the US economy to 6.5% in 2021, sharply higher than the 4.2% it forecast in December. The Fed has yet to adjust its near-zero rate policy, but the bond market is essentially making that change on its own.

Fed Chair Jerome Powell has been adamant the Fed will allow inflation to trend higher than its official 2% per year long-term target and focus instead on what is best for the US labor market. The early March employment report showed 380,000 jobs were added to the economy in February (nearly double consensus expectations). January data was revised higher as well.

The pairing of still dovish central bank policy with government spending sprees seems an entrée investors can’t get enough of. On March 11, President Joe Biden signed into law his $1.9 trillion stimulus package, which includes $1,400 checks and an expanded child tax credit for eligible Americans, among other things. Although the bill was passed with zero Republican support, polls suggest the vast majority of American voters approve of the legislation, including 40-60% of registered Republicans.

It’s no surprise “free money” is generally met with open arms, although growing inflation pressures reflect the reality that trillions in liquidity won’t come without some long-term costs. With his approval numbers high and his Democratic majority in tact (for now), Biden has already shifted the political attention to a proposed $2 trillion infrastructure plan that would raise the corporate tax rate. It will, no doubt, remain in the Washington spotlight for months to come.

Small-cap and tech stocks both lagged the broader market in March. The Russell 2000 index gained less than 1% last month, although its 12.4% year-to-date return still doubles the S&P 500. The NASDAQ, meanwhile, recorded an official correction by dipping a full 10% from its mid-February high. It has since recaptured about half those losses.

Large-cap Value stocks remained popular and have outperformed Large-cap Growth for seven weeks in a row. International equities offered a mixed bag as Non-US Developed stocks rose 2.5% in March, but Emerging Markets fell slightly.

Oil prices reached their highest point in two years thanks in part to the latest OPEC production agreement. West Texas Intermediate crude touched $66 per barrel in March before retreating.

The rate of US vaccinations continues to accelerate. 100 million Americans, roughly 30% of the population, have now received at least one does of the COVID-19 vaccine.

 

 

 

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.