ALL BLOG CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. ANY REFERENCE TO OR MENTION OF INDIVIDUAL STOCKS, INDEXES, OR OTHER SECURITIES ARE NOT RECOMMENDATIONS AND ARE SPECIFICALLY NOT REFERENCED AS PAST RECOMMENDATIONS OF PATTON WEALTH ADVISORS. ALL GRAPHS, CHARTS, AND TABLES ARE PROVIDED FOR ILLUSTRATION PURPOSES ONLY. EXPRESSIONS OF OPINION ARE ALSO NOT RECOMMENDATIONS AND ARE SUBJECT TO CHANGE WITHOUT NOTICE IN REACTION TO SHIFTING MARKET, ECONOMIC, OR POLITICAL CONDITIONS. IT IS COMMON FOR US TO USE A FUND AS A PROXY FOR AN INDEX OR ASSET CLASS. FOR MORE DETAILS SEE OUR FULL DISCLOSURE HERE.
Market Commentary for the week ending July 9th, 2021
- Bond yieids continued to decline from recent highs and stocks closed mixed.
- Job openings remain at a record high impacted by the lower labor participation rate.
- The number of wealthy individuals in the United States surged in 2020.
This Week’s Performance Highlights
- Stocks were volatile in the holiday-shortened week, falling sharply mid-week then surging Friday leaving all of the large stock indexes at new all-time record highs. As measured by the S&P 500, large U.S. stocks closed the week higher by +0.4%. The NASDAQ Composite gained the same while the Dow Jones Industrials lagged up just +0.2%.
- Small U.S. stocks moved in the opposite direction of large stocks for the week falling -1.2%. The loss this week left small stocks behind large stocks for the first time in 2021, still up an impressive +15.9% but shy of large stocks +17.3% gain. Small stocks have been lagging behind large since their March 15th high.
- Only 2 of the 11 sectors were lower with Energy stocks suffering the biggest loss down -3.4% but still have the biggest year-to-date gain of all sectors up +42.3%. The price of oil came off its recent high this week helping drag down energy stocks but oil remains near its multi-year high.
- International stocks were mixed with developed markets higher and emerging markets down. Developed markets edged higher on average gaining +0.3% with the best performing region being Japan up +0.8%. As the accompanying graph shows year-to-date the performance among the three major developed regions have differed meaningfully.
- Emerging markets fell -2.2% for the week impacted by Brazilian stocks down -4.1% and China’s market falling -2.9%. Emerging markets are trailing developed markets for the year up just +4.1% with the largest of the emerging markets, China, down -4.6% in 2021.
- Commodities fell -1.6% for the week fueled by the price of oil coming off its recent highs. The other two alternatives, real estate stocks and gold, posted gains of +2.7% and +1.1% respectively.
- The yield on bonds fell further off their recent highs with the 10-Year U.S. Treasury yield closing at 1.360% after hitting a low midweek at 1.250%. There are heightened concerns that the economic momentum may be slowing impacted somewhat by concerns about the Delta variant of COVID-19. As the accompanying graph shows, the 10-Year yield is off its recent high but still well above the post-pandemic lows.
According the World Wealth Report by Capgemini, 55% of the NEW high-net-worth-individuals created worldwide in 2020 were in the United States compared to just 39% the year before. This stock market fueled boom in wealth in the U.S. propelled the total number of high-net-worth-individuals to 7 million just eclipsing the 6.9 million in Asia-Pacific. Just 4 countries, illustrated in the accompanying graph, account for 62.9% of the total high-net-worth-individuals worldwide, up from 58.4% eight years ago.
The average price of homes in seasonal towns, those people would consider for a second (vacation) home, rose +19% year-over-year through April according to real estate firm Redfin compared to a +16% increase in process for the rest of the United States. This certainly speaks well for second home prices but there are signs this market may be cooling a bit given that the difference in price difference a year ago was 7%.
The number of job openings held at record highs unchanged for the month at 9.2 million. This is double the low hit at the start of the pandemic and up +26.5% from pre-pandemic levels (2 years ago) as illustrated in the accompanying graph. Companies are clearly struggling to fill available jobs as employees jump from job-to-job at a nearly record pace seeking better pay and opportunity.
An added challenge for employers also is the number of people who have left the job market making the pool of available workers smaller. As the below graph shows, the Labor Participation Rate, the percent of people working or actively seeking employment, has fallen from pre-pandemic levels and not recovered. This lower participation rate equates into a loss of approximately 2.7 available employees. Economists though believe this circumstance will improve in the fall as schools reopen.
The Institute for Supply Management (ISM)’s services index came in at 60.1%. Growth certainly continues strong as any reading greater than 50% indicates growth. Momentum is slowing though with the index coming off a record high of 64% the month before and the current reading was meaningfully below economists’ forecasts. This slowdown though is not blamed on consumer demand slowing but instead the challenges companies are having getting both supplies and enough workers.
Initial Jobless Claims for the week inched higher from the prior week to 373,000 but remain near the post-pandemic lows. Claims peaked above 6 million early in the pandemic and were running in the low 200,000’s pre-pandemic.
Upcoming Economic Reports
- Retail Sales
- Consumer Price Index
- Producer Price Index
- Industrials Production
- Initial Jobless Claims
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Any specific securities or investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision including whether to retain an investment adviser.
All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. This content was created as of the specific date indicated and reflects the author’s views as of that date. Supporting documentation for any claims or statistical information is available upon request.
Past performance is no guarantee of future results. Any comments about the performance of securities, markets, or indexes and any opinions presented are not to be viewed as indicators of future performance.
Investing involves risk including loss of principal.
Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. For more information on specific indexes please see full disclosure here.
Any charts, tables, forecasts, etc. contained herein are for illustrative purposes only, may be based upon proprietary research, and are developed through analysis of historical public data.
All corporate names shown above are for illustrative purposes only and are NOT recommendations.
International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.