Telemus Weekly Market Review November 8th - November 12th, 2021
Fighting Through
The highlight of this past week was Wednesday’s inflation data for the month of October. The Consumer Price Index (CPI) showed an acceleration in the rate of price increases, rising 0.9% during the month of October alone, with the annualized inflation rate sitting at 6.2%. Core CPI, which takes out more volatile energy and food prices, is now up 4.6% over the past year. This marked the highest level of inflation in over 30 years.
This report reverberated through the market by driving interest rates higher, the dollar to its highest level since July of last year and sustained the rally in gold. Stocks didn’t seem all that bothered by the news as the S&P 500 closed the week down a mere -0.3%.
As is often the case, there was more to the story than index averages conveyed. Within the S&P 500, there was a fairly wide deviation in return across sectors. Materials stocks, which tend to be most sensitive to inflation, were the top performer up +2.5%. On the other end, stocks in the consumer discretionary sector, which tends to be slower to pass through prices, sold off the most, down -3.2%. From a style perspective, even though the broad market averages fell, value oriented stocks were able claw out a positive +0.1%, while growth stocks dipped lower. There was more of a story outside the United States where emerging markets stood up gaining +1.7%.
Within the bond market, yields rose, but more acutely in the belly of the yield curve, as 3-year and 5-year Treasuries showed the biggest pickup in rates, up 18 and 16 basis points respectively. Since higher interest rates lead to lower bond prices, this pushed bonds lower as the Bloomberg Barclays U.S. Aggregate index lost -0.8%. Shorter maturity bonds were least impacted. The lone bright spot was the municipal market, which posted a most gain of +0.2%.
What seemed to stand out this week was the benefits of diversification when we get economic surprises. It was an interesting week whereby stocks and bonds both declined. However, within the stock market there were pockets of winners, such as in emerging market equities or value stocks. Within the bond market having diversification by holding some shorter maturities or even municipal bonds helped to cushion the blow. Other diversifying assets such as gold served a useful role. In the present climate it is hard to predict the pace and magnitude of shifts in the economy. As this week goes to show, being willing to have balance and diversification, and not just follow the trend, is prudent.
All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Telemus Capital cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk, and cybersecurity risk. These risks are more fully described in Telemus Capital's Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, and may lose value.
The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 11.2 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 4.6 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization. The Bloomberg Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass throughs), asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS).
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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.
