Weekly Market Insights: 8-19-21 - Passage of Infrastructure Boosts Stocks

Opinion

The world is always changing, and what we know to be true is always moving as well.  Anyone who has followed the markets and economic conditions this year or last knows all too well just how dramatic and stressful the flow of information can be.

Over the weekend, Kabul, the capital of Afghanistan, fell to the Taliban.  The same group that has been known the world over as extremists.  We really do not know what Wall Street will or will not do with this information.  President Biden is backing his decision to withdraw troops, which is creating a vacuum in the region. 1

Delta Variant is coming up in more and more earnings calls, but Main Street has yet to reflect the growing number of cases.  In our call Monday, Tyler and I were discussing how, at this point, the math indicates that either you will be vaccinated, or you will be infected with the Delta Strain of Covid.  Expecting a booster is also a wise and safe bet too.

The FED is looking more and more at the possibility of having to change interest rates sooner, as we expected, or later, which will have an impact on the three asset classes I have written about in past editions of the newsletter.

Biden’s infrastructure bill has been voted on, but Wall Street has not rallied on the news, indicating again, that this market condition could be tired.  It does not indicate we need to go to higher ground or change our current approach.  The level of the indexes is one data point.  Kabul, Inflation, Market Breadth, Trading Volume, Interest Rates, are some data points that we look at to help form our approach when we are considering strategy.

Portfolios Activity:

• We are nearing the completion of our 3rd Quarter Best in Category mutual fund selection process. This was delayed a bit due to the SEC changing the deadline for the release of mutual funds holdings & data on the 15th and the 15th falling on a Sunday. 
• Normal cash level rebalances and new fund substitutions are expected as a result of the Quarterly Review.
• Our Growth mutual fund model will undergo a redesign to better align to the market conditions and improve its risk/return ratio.
• We have created a new Portfolio as a Cash Reserve Alternative to a savings account. We are calling it the Inflation Plus portfolio. The purpose of this portfolio is to offer an alternative to excess cash on hand in preparation for the coming inflationary environment.

School is starting back, so be careful on the roads and enjoy the freedom sending kids to school offers parents.  It might be short-lived due to Covid, again.

Jon

Sources:

1. https://www.cnn.com/2021/08/16/middleeast/taliban-control-afghanistan-explained-intl-hnk/index.html

Looking past inflation figures and Delta variant trends, stocks last week found a way to climb higher and set fresh record highs in the process.

The Dow Jones Industrial Average rose 0.87%, while the Standard & Poor’s 500 advanced 0.71%. The Nasdaq Composite index was flat (-0.09%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.77%.1,2,3

Quietly Climbing

Stocks moved higher amid relatively light trading last week. After initially retreating under the weight of Delta variant updates, stocks grinded higher, catalyzed by the Senate’s passage of a $1 trillion infrastructure bill.

Two themes emerged last week. The first was that inflation assumed a less threatening profile. The most recent Consumer Price Index report showed some moderation in consumer price increases, while investors appeared to interpret a hotter-than-expected Producer Price Index report as the peak in this inflation cycle.

Also worth noting were comments by multiple Federal Reserve Bank regional presidents suggesting that the time for tapering (i.e., ending the Fed’s bond purchases) was nearing, with one intimating that tapering could start as early as October.4

Inflation Reports

Consumer prices climbed at their fastest rate since August 2008, rising 5.4% year-over-year. But this elevated rate was expected by most economists. The core inflation rate (excludes the more volatile food and energy prices) came in 4.3% higher, substantially lower than anticipated. This deceleration in core inflation was largely attributed to a slowdown in price increases in used cars and apparel.5

More unsettling was the following day’s Producer Price Index (PPI). The PPI, which can be an indicator of future consumer prices, came in at the highest rate since tracking began, surging 7.8%.6

This Week: Key Economic Data

Tuesday: Retail Sales. Industrial Production.

Wednesday: Housing Starts. FOMC (Federal Open Market Committee) Minutes.

Thursday: Jobless Claims. Index of Leading Economic Indicators.

Source: Econoday, August 13, 2021The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD), Agilent Technologies, Inc. (A), Roblox Corporation (RBLX).

Wednesday: Nvidia Corporation (NVDA), Cisco Systems, Inc. (CSCO), Target Corporation (TGT), Lowe’s Companies, Inc. (LOW).

Thursday: Ross Stores, Inc. (ROST), The Estee Lauder Companies, Inc. (EL).

Friday: Deere & Company (DE).

Source: Zacks, August 13, 2021Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. 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. Companies may reschedule when they report earnings without notice.

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

– Aristotle

Protect Your Tax Data

Protecting your data is very important in today's digital age. The IRS shared the "security six" guidelines that tax pros should follow to protect taxpayer data, but these principles are good for everyone to practice.

Anti-virus software: This software scans computer files for malicious software, or malware, on the device. Anti-virus vendors find new issues and update malware daily. Always install the latest updates of the software on your computer.Two-factor authentication: Two-factor authentication adds an extra layer of protection beyond just a password. Not only do you enter your username and password, but you also enter a security code that can be sent to another device for extra protection.Drive encryption: Drive encryption transforms sensitive data into unreadable code that cannot be deciphered easily by unauthorized people, so only the person who is authorized to access the data can do so.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov7

Tips for Eating Less Salt

Sodium isn't all bad for our bodies, but too much can increase blood pressure and cause stress on the heart and blood vessels. Because of this, it's important to monitor your sodium intake and be aware of how much sodium is in the foods you're eating.

If you want to tackle cutting back on sodium, choose unprocessed or minimally-processed foods. Prepared foods are generally high in added sodium when compared to fresh options. Cut back on sources of high sodium, such as pepperoni pizza, white bread, processed cheese, deli meat and hot dogs, and other red meat and processed foods. Instead, eat more fruits, veggies, and whole grains which are all lower in sodium.

Tip adapted from Harvard Medical School8

What three positive numbers give the same answer when multiplied or added together?

Last week’s riddle: What has exactly three feet, but not a single toe? Answer: A Yardstick.

Havasupai Falls before sunset, Havasupai Reservation, Arizona.

Footnotes and Sources

1. The Wall Street Journal, August 13, 2021

2. The Wall Street Journal, August 13, 2021

3. The Wall Street Journal, August 13, 2021

4. The Wall Street Journal, August 11, 2021

5. CNBC, August 11, 2021

6. Reuters, August 12, 2021

7. IRS.gov, September 20, 2020

8. Health.harvard.edu, October 28, 2019

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.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. 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. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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.

Please consult your financial professional for additional information.

This 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 is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

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