Telemus Weekly Market Review July 5th - July 9th, 2021
July 5 – July 9 Week in Review
Stocks seesawed up and down during the week finishing to the positive as the S&P 500 and NASDAQ both gained +0.4%. The Dow Jones Industrial Average rose +0.2%. The Russell 2000 index fell for the second straight week, declining -1.1%
The story of the week was the rally in the bond market, as interest rates continued to push lower. Intra-week, the yield on the 10-year Treasury had fallen nearly 20 basis points, or 0.2%, before finishing down 5 basis points. Given that bond prices move opposite interest rates, this resulted in a strong week for bonds as the Bloomberg Barclays U.S. Aggregate index was up +0.3%. Yields on the 10-year Treasury are now down nearly a half percentage point from their late March peak of 1.75%.
We believe the fall in bond yields is due to a confluence of factors. First, the supply of Treasury bonds remains tight given a lack of recent issuance by the Treasury. In addition, the continued pace of purchases by the Fed is restricting the supply of Treasury bonds available to investors in the secondary market. Lastly, we feel fears around a surge in COVID-19 cases due to the Delta variant have some questioning whether the Fed may have to hold off on its normalization path.
Economic datapoints released this week remain positive, but did indicate a slowing in the rate of improvement. The ISM Services PMI reading stood out in this regard as its June reading of 60.1 was quite strong, but decelerated from May’s record reading of 64.0. The JOLTS job statistics continue to show a high number of openings, however the number fell slightly from the prior month. One highly scrutinized economic datapoint was the release of the minutes from the June Federal Reserve Open Market Committee (FOMC) meeting. The minutes indicated robust discussion around the potential for tapering the Fed’s asset purchases.
Stocks reacted to the economic news, with stable growth stocks outpacing the returns of more economically sensitive value names. Of late, growth stocks have become more correlated with Treasury bonds, tending to outperform their value counterparts when interest rates fall. For the week, energy was the worst performing sector, declining over -3%. Financials also fell as lower yields were viewed negatively for the sectors’ ability to grow interest income. On the other end, real estate was the top performing sector within the S&P 500, followed by consumer discretionary and utilities. Large cap technology stocks were able to shrug off a newly announced executive order from President Biden that is calling for broader regulation around competitive practices.
Market breadth, or the number of stocks trading above their 50-day moving average remains low. In fact, the market breadth is the lowest since 1999. This is noteworthy given that the S&P 500 and NASDAQ concluded the week at record highs.
In other markets, commodities received a strong bid, as the Bloomberg Commodity index hit its highest level since 2015. Oil prices climbed higher early in the week after talks among OPEC+ partners broke down. Crude prices then reset the remainder of the week and ended down -0.8% to $74.56 a barrel. Earlier in the week the dollar climbed to a 3-month high, but ended near where it began at 92.10. Gold finished the week at $1,810.00, up 1.5%.
July 12 – July 16 Economic Calendar
- Monday
- Tuesday
NFIB Small Business Optimism
6:00AM ET- Consumer Price Index
10:30AM ET
- Wednesday
MBA Mortgage Applications
7:00AM ET
Producer Price Index
8:30AM ET
Federal Reserve Beige Book
2:00PM ET- Fed Chair Powell testimony to House Financial Service Committee
- Thursday
Empire Manufacturing
8:30AM ET
Initial Jobless Claims
8:30AM ET
Fed Chair Powell testimony to Senate banking panel
- Friday
Retail Sales
8:30AM ET
Business Inventories
10:00AM ET
University of Michigan Consumer Sentiment
10:00AM ET
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The S&P 500 index includes 500 leading companies in the US and is widely regarded as the best single gauge of large-cap US equities. The Dow Jones Industrial Average (DJIA) is a widely-watched benchmark index in the U.S. for blue-chip stocks; it is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ. The Nasdaq Composite Index is a large market-cap-weighted index of more than 2,500 stocks, American depositary receipts (ADRs), and real estate investment trusts (REITs), among others. The Russell 2000 index measures the performance of approximately 2,000 smallest-cap American companies in the Russell 3000 Index. The Bloomberg Barclays US Aggregate Bond is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. In addition to investment grade corporate debt, the index tracks government debt, mortgage-backed securities (MBS) and asset-backed securities (ABS) to simulate the universe of investable bonds that meet certain criteria. In order to be included in the Agg, bonds must be of investment grade or higher, have an outstanding par value of at least $100 million and have at least one year until maturity. The ISM Services Purchase Manager Index (PMI), otherwise known as the The ISM Non-Manufacturing Index is an economic index based on surveys of more than 400 non-manufacturing (or services) firms' purchasing and supply executives. The ISM services survey is part of the ISM Report On Business—Manufacturing (PMI) and Services (PMI). The services report measures business activity for the overall economy; above 50 indicating growth, while below 50 indicating contraction. The ISM services report contains the economic activity of more than 15 industries, measuring employment, prices, and inventory levels. The Job Openings and Labor Turnover Survey (JOLTS) program produces data on job openings, hires, and separations; it is produced by the U.S. Bureau of Labor Statistics. The Bloomberg Commodity Index (BCOM) is calculated on an excess return basis and reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3 by world production and weight-caps are applied at the commodity, sector and group level for diversification.
An index is not a security in which an investment can be made, as they are unmanaged vehicles that serve as market indicators only and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. It should not be assumed that portfolio holdings will correspond directly to the comparative index benchmark shown above. The holdings and performance of Telemus client accounts may vary widely from those of the presented indices. Advisory services are only offered to clients or prospective clients where Telemus and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus unless a client service agreement is in place. All composite data and corresponding calculations are available upon request.
Matt joined the Telemus team in 2018. As Chief Investment Officer, he leads the firms the investment process and research effort. Matt has experience as an equity analyst and portfolio manager and has advised corporate pension plans on their manager selection. He’s been quoted in Money Magazine and Barron’s.
