Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 34

Happy Monday.  This week I’m writing from our annual Orion Ascent conference in Arizona. It’s good to re-connect with folks face-to-face again.

  • Heading into the closing days of August, the US stock market is holding onto yet another monthly gain.  Major indices such as the S&P continue to hit new highs. As of Friday afternoon, the S&P 500, for instance, was on pace to close at its 52nd record high of the year.  According to Bespoke Investments, even if there were no more record highs this year, this year would rank as the 6th most since at least 1950.   The current rate is on pace for a record number of record closing highs (77) and eclipsing the prior high back in 1995.
  • Last week was a huge week for some parts of the market that had lagged in terms of relative performance in recent months.  The energy sector was up nearly 8%.  Commodities were up almost 6%.  Small cap and emerging market stocks were both up over 4% for the week.
  • Some investor optimism was based on the Federal Reserve’s meeting last week. In short, the Fed believes that much progress is still needed on the labor front, and that inflation is still  not a problem. In other words, it’s not likely that the Fed will increase short-term rates for at least a year. The bigger question is, when will the Fed start to “taper” and not support the bond markets to the extent that it has?  We’ll likely learn more about this at the Fed’s September 21-22 meeting.  All in all, the markets liked what they heard, or at least what they thought they heard or didn’t hear, from the Federal Reserve last week and believed the Fed will remain accommodative for the economy and the markets.
  • Though the Fed did re-state last week that the recent uptick in inflation is transitory and the numbers moving forward should be moderate, last week did see another key inflation gauge rise 3.6% from a year ago – its biggest jump since early 1990s. The core personal consumption expenditures price index, which the Fed sees as the broadest measure of inflation, equaled the Dow Jones estimate and appeared to be the highest level since May 1991.
  • Despite the tendency for September to be the weakest month of the year for the US stock market, the market’s price momentum suggests that the last four months of the year should finish strong. “The trend is your friend.”
  • This week’s market action will likely be quiet, given it’s the last week before Labor Day.  One number that could move the market though is the all-important Non-Farm Payrolls numbers.  It will be reporting August data. The consensus is for 728k jobs added, and for the unemployment rate to drop to 5.2%.  For comparison, last month 943k were added and the unemployment rate was at 5.4%.
  • Ten year Treasury yields gained 5 basis points last week to close last Friday at 1.31%. Yields did hit an intraday high of 1.38% during the week.  The intraday low from several weeks ago was 1.12%.
  • Bitcoin continues to trade around $50,000 Interesting consumer sentiment study on Bitcoin from Bespoke Investments this past week. In short, the survey had many takeaways but the executive summary is that more investors are becoming positive on the asset class. A large majority of consumers have at least heard of bitcoin by now, and while only one-fifth of those that have heard of bitcoin currently have interest in actually buying it, the positive momentum is clear – and there’s plenty of room for growth.
  • Here was a great article that I came across last week: Kevin Kelly’s Case For Optimism.   Kelly listed multiple reasons why it just makes sense that there is an “Optimist’s Edge”, but he also listed specific reasons for being an optimist now, including:  urbanization, universal connectivity, artificial intelligence, sustainable energy, accelerated innovation, bioengineering, generational handoff and more.  Tasty reading material!
  • An interesting stat from last week from Forest For The Trees: They call it the “Great Resignation” as 55% of surveyed people are looking to change jobs over the next year.
  • Ben Carlson published this past week a list of Books That Explain Past Market Cycles.  How many have you read?
  • I know there are some James Clear fans in the house, and his weekly email always has nuggets.   The latest James Clear’s Weekly  had some good tidbits that could apply to investing: “Always be prepared to absorb a big hit……Diversified enough to survive, concentrated enough to matter.”
  • On this week’s episode of Orion’s The Weighing Machine podcast, our guest is Aaron Scully, portfolio manager for Janus Henderson Sustainable Global Equity . This is a hot topic and Aaron is well experienced in this area.  The timing is good – more and more advisors and investors are asking about sustainable investing.  We even have an OPS Monthly Portfolio Recipe on sustainable investing this coming month with Janus and BlackRock.
  • When it comes to the podcast, I’m interviewing Jeremy Siegel this week, who is a keynote speaker at Orion’s Ascent Conference.  One item he’s talking about is the reduced return expectations from the classic 60/40 stock/bond portfolio: Wisdom Tree’s Rethinking 60/40 Portfolios
  • For more resources, please check out all the goodies at the Financial Advisor Success Hub, including lots of material from strategic partners and also our own material such as OPS’s Monthly Market View  and OPS Reference Guide.

As always, let us know if you have any questions or feedback on anything we produce, you can reach us at rusty@orion.com or benjamin.vaske@orion.com. Thanks for reading and have a great week!

2429-OPS-9/8/2021

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).