August 2021 Market Update

What impacted markets over the last month?

  • U.S. equity markets seem to be in a summer lull at the moment, with market volatility dropping during the first
    few weeks of August. The CBOE Volatility Index was back to pre-pandemic lows in early July and early August,
    and the daily trading range for the S&P 500 Index has been 0.51% (less than half the long-term 1.3% average).
    The pace at which U.S. economic data is exceeding expectations continued to slow over the last month,
    particularly in the retail & wholesale sector, and additional disappointments could lead to volatility moving back
    up off current lows.

How were diversified portfolios affected?

  • Over the last month, U.S. equity performance was fairly even across market cap sizes, but small value stocks
    did lag other areas. Nine out of 11 S&P 500 sectors were positive, with energy and consumer discretionary
    stocks lagging while financials and materials saw the strongest performance. Early August saw energy stocks
    hit by a 7.7% weekly decline in crude oil prices, driven by concerns over COVID’s on-going impact on global
    demand.
  • Globally, emerging market equities were the worst-performing asset class over the last four weeks with China
    driving the decline. A regulatory crackdown on major Chinese tech firms has driven their stock prices lower;
    Chinese firms make up 1/3rd of the MSCI EM Index but were responsible for 3/4th of the monthly decline.
    Yields on 10-year U.S. Treasury notes declined every single week in July, falling from 1.52% at the end of June
    to 1.28% for the week ending August 13.

What’s on the horizon?

  • 8/27 – Personal consumption drove Q2 economic growth almost entirely by its lonesome, so a closer eye is
    being paid to consumer sentiment which has been negatively impacted by COVID and inflation as of late.
  • 8/27 – The Fed’s preferred gauge of inflation, the Personal Consumption Expenditures index, for the month of
    July will give markets further insight into what data the committee will discuss in its September meeting.

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