Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 23

Happy Monday. It might still officially be spring for only one more week, but it appears that summer is already here given the temperatures and with all the summer activities taking place. Feels good. 

Markets Update

Last week was another good week for the stock market, albeit a little slow and quiet, as it was able to notch another positive gain. On the month, the market is now up over 1%. For the quarter, the market is up over 7%. It’s up over 13% year-to-date.

The stock market outlook remains bullish. The market is at all-time highs and the trend is still for higher prices.  Credit spreads in the bond market, often an early signal for market stress, also moved to new lows. If something sinister was going to happen in the stock market, it would often show up in credit spreads first. 

Deeper Dive

Inflation data was the big news last week, but perhaps the market reaction to it was even more notable. When it came to the data, consumer prices jumped more than expected in May. The consumer price index rose 5% on a year-over-year basis, the highest since the summer of 2008. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992.

The Federal Reserve will meet this coming week, but it’s not likely the latest data will cause any change in Fed policy. At least that’s what the bond market is thinking. Ten-year Treasury yields moved from 1.56% to 1.47% last week. The bond market sure doesn’t seem scared of the latest inflation data. 

The U.S. Dollar, though knocking on the door of fresh 5-year lows, also didn’t seem fazed by the latest inflation data.   The greenback got stronger last week. 

For the First Trust and Brian Wesbury fans, he did note in his analysis this past week that consumer prices are up 3.0% annualized versus February 2020, which was pre-COVID-19. Core prices are up 2.6% annualized during the same timeframe. In other words, there might be more going on than just temporary COVID deflation. That said, the bond market is saying something important and yields dropped last week. In my opinion, if there is debate between an economist and the bond market, it’s usually a better bet to go with the latter. 

Wesbury also noted that 25 states announced they are discontinuing expanded federal unemployment benefits. Four states (Iowa, Missouri, Mississippi, and Alaska) expired over the weekend. First Trust anticipates a robust pace of employment growth as we move deeper into 2021. 

Speaking of good news, according to Old Mission, it was reported last week that homeowners with mortgages (approximately 62%) witnessed the equity in their home jump over 20% in the first quarter, compared to last year. That’s $2 trillion of net worth. This is just one more reason why consumer balance sheets and confidence is so strong. 

Upcoming Economic Data

The big economic news releases this week are mostly concentrated on Tuesday and Wednesday. Tuesday is chock full of data, including May Producer Price Index. Consensus is looking for 0.6% increase in both headline and core PPI. On Wednesday, the focus is on the Fed, including the FOMC Meeting Announcement, the latest FOMC forecasts (including their economic expectations), and Fed Chair Jerome Powell holding a press briefing. 

Get many questions from investors about ESG investing? It was noted in the Financial Times last week that Chinese institutions said in a survey that 80% of them will allocate up to 20% of their assets in ESG ETFs over the next five years.

The College World Series starts in Omaha this week. If your team is in and you’re in town, please let me know.  Omaha will be hopping, especially with the U.S. Swim Trials also taking place. 

Speaking of First Trust, the next episode of Orion’s Weighing Machine that will be published this week will feature Ryan Issakainen from First Trust. Ryan has a wealth of experience and it shows in the interview. 

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. You can reach me at rusty@orion.com

Have a great week!

 

1832-OPS-6/14/2021

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).