Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 31
The S&P 500 ended last week at another record high after a weekly return of just under 1%, a solid start for the month of August. Last week’s gains were primarily led by Financials and growth stocks.
- Perhaps the most important data of the month, the Jobs Report, was released Friday. Employment rose by nearly 950,000 jobs, resulting in a decrease in the unemployment rate by half a percent, down to 5.4% in total. A large chunk of these gained jobs (about 570,000) was of workers on temporary layoff, pointing further to economic recovery as laid off employees find their way back into the workforce. Also, according to First Trust, average hourly earnings are up 7.1% compared to February 2020 (the last pre-COVID month), while total hours worked are down 2.7%. Combined, total pay for workers is up 4.3% since February 2020.
- Off the heels of this better-than-expected jobs report, the 10-year treasury yield increased to 1.31%, an increase of about 0.08% just on Friday. It’s appearing more likely, or so it seems the bond market thinks so, that an easing of the Federal Reserve’s bond repurchasing program is impending as the labor force and yields continue to show increased strength.
- Speaking of important monthly data, look out for the July Consumer Price Index (CPI) and Core CPI numbers on Wednesday and the Producer Price Index (PPI) on Thursday.
- CPI and Core CPI are key indicators for measuring inflation, which has been a very hot topic this year. Economists are expecting another increase in these indexes for July. This combined with employment levels will more than likely define the next steps of the Federal Reserve regarding their additional economic support measures instituted during the pandemic.
- As of Friday, 89% of S&P 500 companies have now reported their Q2 earnings, with 87% reporting earnings per share figures that exceeded expectations. According to Factset, this is the highest percentage of S&P 500 companies to beat earnings estimates since they started tracking this data in 2008! Additionally, 87% of the companies have reported revenues above expectations as well, which is well above the five-year average of 65%.
- We are also seeing momentum pick up again in the crypto market despite some uncertainty around potential regulatory action. Over the weekend, Bitcoin and Ethereum hit their highest price levels since mid-May 2021, reaching nearly $45,000 and over $3,100, respectively. Bitcoin is over $45,000 this morning!
- An interesting study was shared in Joachim Klement’s newsletter last week that depicted the relationship between investor return and their “grit.” The study showed that participants who are primed to think about grit and hard work are more likely to sell their losers more quickly and focus on their winners than those who had no preparation at all. Moral of the story: don’t be surprised when times get tough, that’s inevitable. Instead, show off your grit, work hard, and be confident in your ability to persevere in any market conditions. Paper: Grit, Loss and Investor Behavior
- On this week’s episode of Orion’s The Weighing Machine podcast, I spoke with leading ETF portfolio manager – Brinker Capital Investments’ own Grant Engelbart!
- Don’t forget to check out the resources we upload to the Financial Advisor Success Hub, specifically the Monthly Market View video for August and the shiny new updates to the OPS Reference Guide for Q3 2021.
- As always, let us know if you have any questions or feedback on anything we produce, you can reach us at firstname.lastname@example.org or email@example.com.
Have a great week!
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