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

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