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Market Commentary for the week ending July 2nd, 2021


  • Payrolls surged helped by a large one-gain in the government sector but the unemployment rate inched higher.
  • Technology stocks fueled an overall gain for large U.S. stocks while all others fall.
  • Bond prices had a strong week pushing yields further down in spite of inflation fears.


This Week’s Performance Highlights

Market Indexes week ending July 2, 2021

Source: www.YCharts.com

  • Large U.S. stocks were among the minority for the week gaining +1.7% as measured by the S&P 500.  The Dow Industrials lagged behind gaining just +1.0% while the tech-heavy NASDAQ rallied +1.9%.
  • It was a widespread rally among large stocks with every sector but one, Energy, posting gains.  The biggest gains came from the Technology sector, up +3.2% for the week and now higher by +15.7% year-to-date.  As the accompanying graph shows, Technology stocks (the blue line) had been lagging behind the broader by a fairly wide margin not long ago but this gap has is now just a fraction of a percent.

    Technology Sector and S&P 500

    Source: www.YCharts.com

  • Small stocks did not do as well as large stocks instead losing -1.3%.  In spite of the week’s discrepancy in performance between small and large stocks, small stocks continue to hold the lead year-to-date but now by less than 1%.
  • International stocks were losers as well for the week with developed markets off -0.8% on average with the Eurozone of the most impacted by decline in Spain, Italy, and others.
  • Emerging market lost an average of -1.3% with the largest, China, down a sharp -3.4% as the country celebrated the 100th anniversary of the Chinese Communist Party.  Hong Kong’s market was also lower for the week by -1.2% but year-to-date Hong Kong is still meaningfully higher, up +9.9% while China’s is lower by -1.7% in 2021.
  • Two of the three alternative asset classes, commodities and gold, were among the few asset classes moving higher for the week.  Commodities gained +2.3% and are now up +31.9% for the year while gold was up just +0.4% and is still negative in 2021.  Real estate stocks lost -0.8% for the week.
  • Bonds had a strong week gaining +0.6% but remain lower year-to-date.  In spite of all the concerns about inflation and the likelihood of rising interest rates, the yield on the benchmark 10-Year Treasury Bond closed the week at 1.437% from 1.528% the week before.  This move lower in yields has been contrary to what many had forecast.

Interesting Numbers


A survey of 750 investors in the U.S., all with investable assets of more than $100,000, shows that the average investor expects a +17.5% return on stocks, after inflation, over the long term.  This compares to financial professionals suggesting +6.7% and a long-term historic average of roughly +7.0%.  Investors’ expectations have been rising as the bull market starting in 2009 has persisted.  If history can be used as an indicator, it is likely many investors are going to be disappointed.


The price of lumber rocketed higher early this year as demand for new homes surged. Since the peak in prices just 60 days ago, the price has fallen by more than half. At current levels it is still roughly double where it was prior to the start of the pandemic. Time will tell if we go back to those pre-pandemic prices or if we now have a higher new normal going forward.

Lumber Futures

Source: https://www.nasdaq.com/market-activity/commodities/lbs/historical

Economic Indicators


The U.S. economy added 850,000 new jobs in June with every major economic sector posting gains except for Construction coming in with a minor loss. Leisure and Hospitality made up the largest portion of the gain adding 343,000 jobs as people ramp up travel, entertainment, and eating out. Although the report was better than economists had expected, 188,000 jobs were additions to the government’s payroll largely the result of pandemic-related effects on education. If we discount this gain, the month’s overall number was a bit less impressive.

The unemployment rate is remaining stubbornly high, actually rising from 5.8% to 5.9% this month, compared to the pre-pandemic 3.5%. Schools and daycare facilities being closed combined with extra unemployment benefits have kept some people from reentering the workforce but these circumstances should go away by fall and help further drive the employment market.


The pace of home price increases continued to accelerate in the most recent month with the year-over-year gain for the S&P CoreLogic Case-Shiller Home Price Index reaching +14.9%. As illustrated in the accompanying graph, this acceleration started early last year at the start of the pandemic and has not yet shown any signs of slowing. The current pace of price gains is very high but is not entirely uncommon and not yet at levels reached prior to the 2008 Financial Crisis although it’s very close.

Case-Shiller 20 City Home Price Index

Source: www.yCharts.com


Consumer Confidence continued to improve in June with index reaching 127.3 compared to 120.0 the month before.  There were improvements in both the Present Situation Index, a measure of current circumstances, as well as the Expectations Index, a measure of what is expected in the coming months.  This most recent reading is the highest since the start of the pandemic but is still shy of levels in 2018 and 2019.


Initial Jobless Claims hit their lowest level since the start of the pandemic coming in at 365,000 for the most recent week.  This was down from 415,000 the week before and below economists’ forecasts.

Upcoming Economic Reports

  • ISM Services Index
  • Job Openings
  • Initial Jobless Claims
  • Consumer Credit

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