Market Update: September 7, 2021
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Economic data for the week included stronger results in the manufacturing and construction segments, while services sentiment and the monthly employment situation report came in weaker than expected. Home prices also continued to increase at historically impressive rates.
Global equity markets gained last week, with economic data coming in as expected for the most part and little late summer news. Bonds were similarly flat in the U.S., with little trading volume, although foreign issues fared better due to a weaker dollar. Commodities ticked higher, particularly natural gas, due to recent disruptive storm activity.
U.S. stocks were mixed to higher last week, with economic releases generally meeting expectations, and late summer volumes tending to be lower. A weaker employment report cast a shadow on markets briefly Friday, with the implications that labor markets are losing steam (despite summer seasonal issues). At the same time, weaker numbers raise the possibility that the Fed’s tapering actions (let alone rate increases) could be pushed back further. However, it’s only one report, and an imprecise one at that. By sector, defensive groups consumer staples, health care, and utilities led again, with gains over a percent for the week. Cyclical financials and energy lost the most ground, down 1-2%. Real estate also fared well, as the sector continues to recover from pandemic-related concerns.
Foreign developed market stocks in Europe performed largely in line with U.S. issues, while Japanese and emerging market stocks fared far better. Slowing growth in Europe continues to be a concern, as growth abroad was slower than that of the U.S. to begin with, along with still-high Covid cases, and just-tightened travel restrictions (specifically on the U.S.). Japanese equities jumped sharply upon the surprise resignation of the prime minister, upon criticism of his handling of the pandemic. It’s important to note that governments outside the U.S. change frequently, so often don’t generate the market disruption one might expect—in fact, surfacing of market- or stimulus-friendly candidates may be a bullish signal, as it was in Japan last week. Chinese equities bucked recent negativity with the government announcement of a new stock exchange, focused on capital financing for small- and mid-cap firms, as well as additional credit facilities for such firms.
U.S. bonds were little changed, with minimal movement of treasury yields during the last ‘summer’ trading week, a period which often features lighter volumes. High yield and floating rate bank loans fared better, with gains. A weaker dollar propelled foreign bonds higher, mostly on the emerging local debt side, which tends to be more volatile, and gained a percent.
Commodities were little changed on net, which included gains in energy, industrial metals and precious metals; these offset agricultural price declines. The price of crude oil ticked higher by under a percent to just over $69/barrel, while natural gas prices spiked by 8% in the aftermath of Hurricane Ida, and production shutdowns, along with associated storm flooding along the East Coast last week.
Sources: LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.