Telemus Weekly Market Review July 26th - July 30th, 2021
July 26 – July 30 Week in Review
Strong earnings results and an uneventful Federal Reserve meeting weren’t enough to sustain the uptrend for stocks as the S&P 500 and Dow Jones Industrial Average both lost -0.4%. Large cap technology stocks sold off leading the NASDAQ lower by -1.1%. Small caps, which have more recently trailed their large cap peers, were able to churn out a positive outcome as the Russell 2000 rallied +0.8%.
This week saw continued strength in corporate earnings results for the second quarter. Companies in the S&P 500 that have already reported have eclipsed expectations by nearly +17%. The challenge, however, has started to come from companies warning that the pace of growth may become harder to sustain going forward. This week Apple, Facebook and Amazon all indicated that the pace of growth is likely to slow in the coming quarters. As a result, the performance of all three stocks lagged the broader market. Google, which provided a more optimistic outlook, was the only mega cap technology name to deliver a positive return for the week.
Outside of the U.S., a tightening regulatory grip within China led to a steep selloff among Chinese stocks. The Shanghai Shenzhen CSI 300 Index dropped over 5%, as did Hong Kong’s Hang Seng Index. This negatively impacted emerging markets as a whole, with the MSCI Emerging Markets Index declining -2.5%.
On the economic front, the Federal Reserve meeting this week proved to be anticlimactic, however, the Fed’s statement did indicate that it will continue to assess the need for the size of its $120 billion a month quantitative easing program. While two meetings ago the Fed was not even ‘thinking about, thinking about’ reducing the pace of quantitative easing, they appear to be nearing a point where they may begin to consider taking action.
The second quarter Gross Domestic Product (GDP) was released, indicating the U.S. economy grew +6.5%. While this is a sizable rate of growth, it fell short of many estimates due to a lack of inventory builds given supply chain challenges. Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation metric, grew +0.4% on a month-over-month. The annualized rate is now +3.5%. This is the highest annualized rate for the core PCE measure since 1991. Personal spending data was encouraging, growing 1% in June, versus May. Lastly, the S&P CoreLogic Case-Shiller index showed home prices rising +16.6% from a year ago.
Bonds fared well as yields continued to decline across the curve. The 2-year Treasury declined one basis point to 0.19%. The yield on the 10-year Treasury declined more, edging 6 basis points lower to 1.22%. The bond market as a whole was up 0.3% for the week.
In other markets, crude oil climbed higher by +2.3% to close at $73.95. The dollar declined -0.9% to $92.05, while the price of gold appreciated +0.6% to $1812.60 an ounce.
August 2 – August 6 Economic Calendar
- Monday
ISM Manufacturing
10:00 AM ET
- Tuesday
- Factory Orders
10:00AM ET - Durable Goods Orders
10:00AM ET
- Wednesday
MBA Mortgage Applications
7:00AM ET- ADP Employment
8:15AM ET - ISM Services
10:00AM ET
- Thursday
- Trade Balance
8:30AM ET
Initial Jobless Claims
8:30AM ET
- Friday
- Unemployment Rate
8:30AM ET - Consumer Credit
3:00PM 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 Shanghai Shenzhen CSI 300 is a capitalization-weighted stock market index designed to replicate the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. It has two sub-indexes: the CSI 100 Index and the CSI 200 Index. The Hang Seng Index ("HSI") is one of the earliest stock market indexes in Hong Kong. Publicly launched on 24 November 1969, the HSI has become the most widely quoted indicator of the performance of the Hong Kong stock market. Stocks are free-float adjusted for investability representation. The MSCI Emerging Markets Index captures over 1,300 large- and mid-cap securities across 27 Emerging Markets (EM) countries and five world regions. With 1,412 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The PCE Price Index Excluding Food and Energy, also known as the core PCE price index, is released as part of the monthly Personal Income and Outlays report by the U.S. Department of Commerce. The index makes it easier to see the underlying inflation trend by excluding two categories – food and energy – where prices tend to swing up and down more dramatically and more often than other prices. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated monthly. It is one of the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate nationally.
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.
