Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 20

Happy Monday. Hope you had a wonderful weekend. It does feel as if life continues to normalize, at least in this household given graduation parties, baseball games, and dinner parties. And the golf courses were packed this weekend too. Speaking of golf, how about that Phil Mickelson? At 50 years old, he was the oldest golfer to win a Major golf championship. I know for some of his hardcore fans, yesterday’s result was better than any Super Bowl or World Series for them. Good stuff.

Markets Update

As for the markets, last week was another week with considerable volatility and news events, but in the end, the market was basically unchanged and remains near all-time highs. The overall U.S. market is still only down for the month of May less than -1%, but still up nearly 5% for the quarter and up about 11% for the year.  

Last week was indeed yet another interesting week in the market, including some more sharp drops in the more speculative parts of the market. This relative weakness isn’t necessarily new though, as it’s now been over 3 months when the more speculative parts of the market peaked (Feb 12) in terms of relative performance. In my experience, this correction is just a natural and normal part of market action after seeing such parabolic increases earlier. 

Bottom line, the stock market outlook remains cautiously optimistic. Cautious because of concerns ranging from inflation to the dollar to cryptocurrencies crashing, but optimistic because the economy is getting better as normalization is appearing all over the country, the Federal Reserve remains powerfully supportive of the economy and markets, and key parts of the global markets remain well-behaved (including Treasury and particularly corporate bonds).

Deeper Dive 

Ten-year treasury bond yields, for instance, remained unchanged on the week last week at 1.63%. This was despite the continued concerns over the possibility of sustained inflation, which now ranks in many investor surveys as the top market risk. 

Because of the inflation concerns, many investors are worried about their fixed income holdings. On this point, for an excellent paper on how bonds do in a rising rate environment, check out this Orion white paper. In short, bonds do a lot better than people think.  

Crypto had another wild ride last week. Bitcoin lost over 20% last week, dropping from $47,000 to $37,000 last week. That’s considerable volatility just on the weekly price change, but the crypto markets were actually far wilder than that last week (and even over the weekend). As of this writing, Bitcoin is above $38,000. 

For a perspective on Bitcoin, and market crashes in general, Ben Carlson from Ritholtz Wealth Management in one of his short and sweet daily commentaries last week wrote “Crash Rules.” Good reminders on markets in general. 

More Market Commentary 

Speaking of Ritholtz, Josh Brown from Ritholtz Wealth Management team spoke at an Orion webinar last week, talking about how they manage money and the tools they use to do so. As always, Josh is entertaining and educational. For a replay, you can access it here.

The economic calendar this week features a fair amount of housing data early in the week, with an updated 1Q GDP number on Thursday, but Friday rates as the key day in my opinion with April Personal Income (including the Core PCE price index), May Chicago Purchasing Managers Index (PMI) more consumer sentiment data. 

A new Orion The Weighing Machine podcast has been published. The latest is with Scott Ladner, the CIO of Horizon Investments. Scott provided a thoughtful interview ranging from income investing to Russian literature.

A question I often get is what investing books I recommend. For readers who want something short and perfect for an airplane ride, Whitney Tilson’s “The Art of Playing Defense” should scratch that itch. It’s loaded with nuggets.

 For more resources on the economy and markets, including Partner content, please review the Orion Portfolio Solutions Financial Advisor Success Hub. 

As always, please let me know if you have any feedback or questions. rusty@orion.com. Have a great week!

 

1729-OPS-5/25/2021

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).