Monthly Market Insights | July 2021
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U.S. Markets |
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Stocks moved higher last month as investors looked past accelerating inflation and the Fed’s pivot on monetary policy. The Dow Jones Industrial Average slipped 0.07 percent but the Standard & Poor’s 500 Index rose 2.22 percent. The Nasdaq Composite led, gaining 5.49 percent.1
Inflation ReportThe May Consumer Price Index came in above expectations. Prices increased by 5 percent for the year-over-year period—the fastest rate in nearly 13 years. Despite the surprise, markets rallied on the news, sending the S&P 500 to a new record close and the technology-heavy Nasdaq Composite higher.2 Fed PivotThe Fed indicated that two interest rate hikes in 2023 were likely, despite signals as recently as March 2021 that rates would remain unchanged until 2024. The Fed also raised its inflation expectations to 3.4 percent, up from its March projection of 2.4 percent. This news unsettled the markets, but the shock was short-lived.3 News-Driven RallyIn the final full week of trading, stocks rallied on the news of an agreement regarding the $1 trillion infrastructure bill and reports that banks had passed the latest Federal Reserve stress tests. Sector ScorecardIndustry sector performance was mixed. Gains were realized in Communication Services (+2.96 percent), Consumer Discretionary (+3.22 percent), Energy (+1.92 percent), Health Care (+1.97 percent), Real Estate (+3.28 percent), and Technology (+6.81 percent). Losses were suffered in Consumer Staples (-1.95 percent), Financials (-3.84 percent), Industrials (-3.34 percent), Materials (-5.92 percent), and Utilities (-2.78 percent).4
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What Investors May Be Talking About in July |
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Second-quarter earnings season is near, and investors will see whether Corporate America can build upon its first-quarter results. Earnings are expected to increase 61 percent, in part driven by a nearly 20 percent growth in sales. In the first quarter, earnings rose 52 percent on an 11 percent increase in sales.5 First-quarter earnings didn’t move the market, so it’s uncertain whether second-quarter numbers will be a catalyst. But if earnings miss the mark, analysts may find themselves evaluating stock valuations over the next few months. |
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World Markets |
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Overseas markets were mixed in June, with the MSCI EAFE Index falling 0.33 percent.6 European markets, however, edged higher. France picked up 0.93 percent, Germany tacked on 0.71 percent and the U.K. rose 0.21 percent.7 In the Pacific Rim, Australia was among the standouts, gaining 2.11 percent. Hong Kong lost 1.11 percent and Japan dropped 0.53 percent.8
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Indicators |
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Gross Domestic Product (GDP)The final reading of first-quarter GDP growth was unchanged at 6.4 percent.9 EmploymentNonfarm payrolls increased by 559,000, dropping the unemployment rate to 5.8 percent. The leisure and hospitality sector experienced the largest gain, with 292,000 jobs added.10 Retail SalesRetail sales declined 1.3 percent in May as consumers shifted their spending from goods to services such as airline travel.11 Industrial ProductionOutput at America’s factories, mines, and utilities rose 0.8 percent. It was the third consecutive month of expanded output.12 HousingHousing starts rose 3.6 percent as the high cost of materials hampered activity.13 Existing home sales dropped for the fourth consecutive month, sliding 0.9 percent in May. Inventory shortages and declining affordability continue to weigh on the market.14 Sales of new homes fell 5.9 percent as the median sales price rose to a record $374,400.15 Consumer Price Index (CPI)The prices of consumer goods surged in May, hitting levels not seen in almost 13 years. The CPI rose 0.6 percent from April 2021.16 Durable Goods OrdersOrders for long lasting goods rose 2.3 percent, which represented the largest month-over-month gain since July 2020.17 |
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The Fed |
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Following its June meeting, the Federal Open Market Committee indicated that two interest rate hikes in 2023 were likely. The Fed also raised its inflation expectations to 3.4 percent, up from its March projection of 2.4 percent.18 However, Fed officials continue to maintain that price increases will be transitory even though there has been no indication of when or by how much, the Fed may begin tapering its monthly bond purchases.18 By the Numbers: Rubies, Riches, and Crowns |
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance. The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange. Please consult your financial professional for additional information. Copyright 2021 FMG Suite. |
1. The Wall Street Journal, June 30, 2021
2. CNBC.com, June 10, 2021
3. The Wall Street Journal, June 16, 2021
4. Sectorspdr.com, May 31, 2021
5. FactSet.com, June 4, 2021
6. MSCI.com, June 30, 2021
7. MSCI.com, June 30, 2021
8. MSCI.com, June 30, 2021
9. CNBC.com, June 24, 2021
10. The Wall Street Journal, June 4, 2021
11. The Wall Street Journal, June 15, 2021
12. MarketWatch.com, June 15, 2021
13. CNBC.com, June 16, 2021
14. CNBC.com, June 22, 2021
15. FoxBusiness.com, June 23, 2021
16. The Wall Street Journal, June 10, 2021
17. CNBC.com, June 24, 2021
18. The Wall Street Journal, June 16, 2021
19. GemSociety.org, 2021
20. USNews.com, June 2021
21. MoneyInc.com, June 2019