Telemus Weekly Market Review September 6th - September 10th, 2021
Looking Beyond the Data
The market seems to be narrowly focused on the short-term. As we emerge from the depths of the pandemic, each incremental datapoint is scrutinized. This coming week the focus will be on The Bureau of Labor’s Consumer Price Index (CPI) report for the month of August. It will give an indication on inflation. We know that inflation is trending higher than pre-COVID levels and whatever gets reported for August will have limited relevance on what long-run inflation will be. However, incremental datapoints are highly scrutinized as they may exhibit clues on when the Fed may taper or how much longer corporate earnings can continue to handily surprise Wall Street expectations.
These near-term data points have taken on greater relevance as they provide clues on the direction and magnitude of a recovery that is not like any other economic circumstance we’ve encountered in the past. Ultimately it is less imperative whether the economic data supports the Fed tapering (or slowing) the pace of its asset purchases in September, November or January. In the end the direction of the market is going to be guided by the path that economic conditions and corporate earnings take throughout 2022, 2023 and beyond.
This past week, the S&P 500 fell -1.7% on concerns around the slowing rate of economic growth rate, above average market valuations, and continued concerns around the delta variant. The S&P 500 declined each day during the holiday shortened week. The worst day of the week was Friday when the S&P dipped -0.8% lower. In a year where the S&P 500 is up over 20%, an orderly and mild downdraft is not unusual or unexpected.
In this period of short-term focus, we try to remind ourselves to keep perspective on the long-term. Down weeks and months will happen and an orderly -1.7% retracement can be viewed as an affirmation that the market is acting in a healthy and efficient manner. When we consider the long-term, we take comfort in the fact that economic conditions, while admittedly slowing from an unprecedented pace of growth, remain strong. The market has ample liquidity, consumer balance sheets are incredibly strong, and corporate financials are robust. As data around the economic recovery is released in the weeks ahead, we will try and remain focused on the long-term picture and look past the less relevant short-term noise within it.
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The Consumer Price Index (CPI) measures the performance of US inflation (not seasonally adjusted) which is the rate of change of consumer goods prices. It measures of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. The data is from Bureau of Labor Statistics. The value of the current month CPI is estimated by the average value of the previous two months CPI. 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. 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.
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.