Conway’s QuickTake: Week of August 30, 2021


Here’s What Happened Last Week:

U.S. Equity Markets

  • U.S. stocks rose over the week in-line with the ongoing economic recovery and from news of the Food and Drug Administration (FDA) formally approving the Pfizer-BioNTech vaccine.
  • Technology shares led markets, leading to the Nasdaq’s lead over other comparable large-cap indexes. Growth shares generally bested value-oriented stocks.
  • Shares in the smaller energy sector also performed well after oil prices rose around 10% over the week.
  • Small-cap stocks had a healthy recovery and bested most major large-cap benchmarks.
  • Year-to-date (YTD), market leadership amongst different large-cap investment styles (value, growth, blend) is nearly neck-and-neck.
  • Large-caps have taken over YTD leadership from small-caps in all but the value investment style.

International Equity Markets

  • Developed, non-U.S. equities were in-line with U.S. counterparts while emerging market equities outperformed, recovering from recent weakness.
  • European equities increased based on robust economic growth and signs that central banks would remain accommodative.
  • Japanese stocks also rose over the week shaking off negative sentiments from their battle against the coronavirus.
  • Chinese stocks recovered from earlier lows helping to boost the results of the MSCI Emerging Markets Index for the week.

Credit Markets

  • Treasury yields increased contributing to negative weekly returns for the asset class. Yields rose in response to improving economic sentiment.
  • Demand for risk assets was robust pushing credit spreads tighter in many cases helping offset losses stemming from duration.
  • The municipal bond market was slightly negative last week but held up better than Treasuries. Strong technicals and demand for tax-efficient paper serve as strong support for the asset class despite elevated valuations.
Source: iStock 2021

U.S. Economic Data/News

  • Early last week, the FDA provided full approval of the Pfizer vaccine which could result in more employers mandating vaccinations.
  • Fed Chair Jerome Powell spoke at the Kansas City Fed’s recent Jackson Hole conference. Despite some concerns that his guidance for tapering would change, his comments were in-line with previous outlooks.
  • Last week’s economic data releases were mostly positive. Home sales rose more than expectations and jobless claims were near the lowest level during the pandemic.
  • The U.S. Commerce Department revised its estimate of second quarter GDP to 6.6%, modestly above the initial 6.5% reading.

International Economic Data/News

  • The Eurozone economy remained in expansion mode after reporting an impressive Purchasing Managers’ Index (PMI) reading of 59.5 (levels greater than 50 indicate expansion). The pace of growth came down modestly from last month but remains very strong relative to historical levels.
  • While Eurozone inflation numbers were elevated, ECB Governing Council Members continued to indicate that it will likely be transitory as wage growth remains muted.
  • The UK government is expected to roll out a program to provide boosters to the most vulnerable portion of the population starting in September.
  • Japan extended its coronavirus-related state of emergency to include 8 additional regions after noting that new infections are spreading at an unprecedented rate. Notably, Japan’s vaccination rate has increased and the country is expected to have 60% of the population vaccinated by the end of September.
  • The China Securities Regulatory Commission pledged to cooperate with U.S. counterparts related to the auditing of Chinese companies that are listed in the U.S. The years’ long dispute with the U.S. stems from China’s refusal to provide full access to the financial data of Chinese companies that trade in the U.S. on national security grounds.

Looking ahead…

Monday, August 30, 2021

  • Germany CPI
  • China Manufacturing PMI
  • China Composite PMI
  • Confidence Survey

Thursday, September 2, 2021

  • US Jobless Claims
  • US Nonfarm Productivity

Friday, September 3, 2021

  • US Unemployment Rate

Sources: The WSJ, T. Rowe Price Global Markets Weekly Update, GS Weekly Market Monitor

This commentary was written by Craig Amico, CFA®, CIPM®, Associate Director, Noreen Brown, CFA®, Chief Wealth Strategist and Steven Melnick, CFA®, Associate Director at Summit Financial, LLC., an SEC Registered Investment Adviser (“Summit”), headquartered at 4 Campus Drive, Parsippany, NJ 07054, Tel. 973-285-3600. It is provided for your information and guidance and is not intended as specific advice and does not constitute an offer to sell securities. Summit is an investment adviser and offers asset management and financial planning services. Indices are unmanaged and cannot be invested into directly. The periodic returns are represented by the following indices: large cap value by Russell 1000 Value TR Index, large cap blend by Russell 1000 TR Index, large cap growth by Russell 1000 Growth TR Index, mid cap value by Russell Mid Cap Value TR Index, mid cap blend by Russell Mid Cap TR Index, mid cap growth by Russell Mid Cap Growth TR Index, small cap value by Russell 2000 Value TR Index, small cap blend by Russell 2000 TR Index, and small cap growth by Russell 2000 Growth TR Index, international developed by the MSCI EAFE NR USD Index, Emerging Markets by the MSCI EM NR USD Index, U.S. Aggregate Bond by the BBgBarc US Agg Bond TR USD Index, U.S. Municipals by the BBgBarc Municipal TR USD Index, and Corporate High Yield by the BBgBarc US Corporate High Yield TR USD Index. The S&P 500 Index is a market capitalization-weighted Index of 500 widely held stocks often used as a proxy for the stock market. It measures the movement of the largest issues. Standard and Poor’s chooses the member companies for the 500 based on market size, liquidity, and industry group representation. Included are the stocks of eleven different sectors. The Nasdaq Composite Index is a large market capitalization-weighted index of more than 2,500 U.S.-domiciled stocks. The index’s composition is heavily weighted to the information technology sector, with consumer services, health care and financials the next most prominent industries. The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 1000 Index measures the performance of the large cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index representing approximately 90% of the total market capitalization of that index. It includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. It is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI EAFE Index (Europe, Australasia, Far East) captures large- and mid-cap representation across developed markets countries around the world, excluding the U.S. and Canada. The index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Emerging Markets Index captures large- and mid-cap representation across emerging markets countries across the world. The index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI China Index captures large- and mid-cap representation across China A shares, H shares, Red chips, P chips and foreign listings. The index covers about 85% of this China equity universe. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency. The Bloomberg Barclays Municipal Bond Index covers the U.S. dollar-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. The Bloomberg Barclays U.S. Corporate High-Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Data in this newsletter is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss. 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