Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 16

Happy Monday! Hope you had a nice weekend. It was another nice Sunday in Omaha—so nice my kids made me go mountain-biking on some great, “more-technical-than-you-might-expect” trails. It was a blast, and nobody crashed and burned, but I think I’m going to be a bit sore for a few days!  

Taking a Look at the Markets

It should be another interesting week in the markets. We have plenty of catalysts for market movement, including the Federal Reserve meeting, plenty of big earnings reports (particularly in large tech), inflation data, and the debut of President Joe Biden’s “American Families Plan.”

Last week, the overall market finished strong and basically near all-time highs, but still essentially unchanged.  Market leaders last week included small caps, emerging markets, and commodities.  The notable laggard was Bitcoin.

We are still on track for a great month of returns in the stock market. The YTD return for the overall US market is still nearly 12%. 

It seemed like the hottest topic in the financial press in recent days was the potential tax impact from President Biden’s plan. The initial news from last Thursday, which the stock market didn’t like, had a few hints as to what the opening salvos will be. This topic will likely dominate the news cycle for a while, as the details get negotiated in the weeks ahead. Bottom line, taxes are likely going up (barring some extraordinary event that stalls the rapidly improving economy), though likely not as much as the early indications suggest. Either way, looking back at past market history, the impact on the stock market from increased taxes has been muted. 

Let’s Talk Inflation

First quarter GDP is released this coming Thursday, but arguably a more pivotal economic number this coming week is Friday’s inflation data (Core PCE price index). Inflation is a concern for some investors, and for good reason. According to First Trust investments, the Producer Price Index (PPI) is up at an annualized rate of 7.6% the last 6 months, and the Consumer Price Index (CPI) is up 3.6% annualized over the same time frame.  Yes, these gains are partly transitory because of some extremely negative data points rolling off the 1-year numbers, but there are also legitimate supply chain problems coupled with a surge in economic demand.   Money supply has also grown over 25% the last 12 months. Some markets are reacting sharply to all this, including the commodity markets such as lumber, oil, and grain prices.

The bond market, however, is apparently unconcerned about inflation, at least in recent weeks. Ten-year Treasury yields were basically unchanged last week, dropping to 1.58% from 1.59% the Friday before.  

Bitcoin and Beyond

Though apparently off to a nice start this week, crypto had another tough week last week, with Bitcoin dropping under $50,000. It was just at $65,000 less than 2 weeks ago.  There are a few reasons cited for the losses, but really, it’s been on fire this year and due to cool off.  

About a third of the companies in the S&P 500 will report earnings this week, including Apple, Microsoft, Amazon and Alphabet. So far, 25% of the companies in the S&P 500 have already reported and 84% are beating earning expectations—a rate that if maintained, will tie the highest beat rate since FactSet began tracking this stat in 2008.

With continued improvement in the economy, the “Big Money” keeps getting more bullish. Check out plenty of big money views in the latest Barrons’ issue

This remains a great time to be a financial advisor. Did you know that according to Gallup, owning stocks was still more common in the years from 2001 to 2008 (when an average 62% of U.S. adults said they owned stock) than it is now? In fact, even with household incomes of at least $100,000, 16% still don’t own any stocks. And that number grows to 35% that don’t own a single stock for households that have incomes between $40,000 and $100,000. 

Congrats to the Kentucky Wildcats for winning their first NCAA volleyball championship—and the SEC’s first for that matter, too. 

Have a great week! For more resources on the economy and markets, including Partner content, please review the Orion Portfolio Solutions Financial Advisor Success Hub

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The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

About Rusty Vanneman
Rusty Vanneman serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand. Rusty is a host of Orion’s The Weighing Machine podcast and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has also managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive in 2017. Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments. Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA).