Archive for ND&S Updates

ND&S Weekly Commentary 8.30.21 – Summer Flew By

August 30, 2021 

Markets reached all-time highs again last week as dovish comments by the Federal Reserve gave investors’ confidence to shrug-off the Afghanistan withdrawal crisis and the threat of two hurricanes. The Food & Drug Administration (FDA) approval of the Pfizer-BioNTech vaccine gave confidence toward an on-going recovery.

For the week, the DJIA increased 0.98%, the S&P 500 rose 1.54%, and the tech-heavy Nasdaq climbed 2.82%. U.S. small cap stocks, as measured by the Russell 2000, soared 5.06% and have returned 47.1% over the last 12 months. International stocks also had a strong week with developed markets (MSCI EAFE) and emerging markets (MSCI EM) adding 1.86% and 4.29%, respectively. Oil prices jumped 10.6% last week as hurricane Ida forced the shut-down of 96% of oil production capacity in the Gulf of Mexico.

So far this year the S&P 500 has returned 20% and has not had a 5% pull-back since last November. There has been a lot of sector rotation within the markets of late. Energy had a roaring start to the year but has given some back recently and is down 9.4% for the quarter as oil prices have declined. The best sectors recently has been the more defensive areas, utilities and healthcare, which are up 7.8% and 6.6%, respectively, while the S&P 500 has risen 4.9% this quarter.

On Friday, the Federal Reserve Chairman Jerome Powell stated that tapering of asset purchases could begin before the end of the year. Mr. Powell also reiterated that he remains confident that the inflation surge being felt this year is temporary. Yields drifted higher last week with the 10yr U.S. Treasury closing at a yield of 1.31% (5bps higher from the previous week).

Economic news last week revealed some possible slow-down in consumer spending and economic growth. Personal spending for July rose only 0.3% which missed consensus. The preliminary GDP report for 2nd quarter 2021 came in at 6.6% versus and estimate of 6.7%. The initial weekly jobless claims rose slightly to 353k. This week’s economic reports includes housing starts, consumer confidence, hourly earnings, and trade balance.

Historically, September has been the worst month of the year for the S&P 500, which has declined an average of 0.56% since 1945. With the devastation of hurricane Ida, the crisis in Afghanistan and the uncertainty of a delta variant surge, we would not be surprised by a market pull-back. We recommend a slightly cautious bias and for investors to remain in-line with long-term investment goals and asset allocation.

“What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.” – Warren Buffett

ND&S Weekly Commentary 8.23.21 – Markets Recede from Records

August 23, 2021 

Stocks gave some back last week following reports that US retail sales declined and the US Fed is considering tapering its asset purchases this year.

For the week, the DJIA declined 1.01% while the S&P 500 moved lower by 0.55%. The tech-heavy Nasdaq lost 0.70%. International markets were under pressure last week as developed markets (MSCI EAFE) finished lower by 2.94% % while emerging market equities (MSCI EM) gave back 4.61%. Small company stocks, represented by the Russell 2000, dropped 2.47% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, advanced 0.16% for the week as the yield curve moved lower. As a result, the 10 YR US Treasury closed at a yield of 1.26% (down 3 bps from the previous week’s closing yield of ~1.29%). Gold prices closed at $1,779/oz. Oil prices dropped to $62.32/bbl from $68.93/bbl the previous week.

The release of the Federal Reserve July meeting minutes indicated that the Fed might begin tapering asset purchases before year-end. The Fed will host its annual Jackson Hole symposium (virtually) this week and Federal Reserve Chair Jerome Powell is scheduled to deliver his remarks on Friday. Market participants will be awaiting any insights as many central bankers aim to move away from easy policy. In other economic news last week, retail sales in July came in lower than expected and fell 1.1%. Despite the decline, the $617.7 billion in sales still represents a 15.8% increase from a year ago.

After a strong 8 months to start the year, we see markets grinding along over the next few weeks to months looking for a catalyst. Markets have so far been resilient to talks of “Fed tapering” and rollbacks of government stimulus as they have mostly looked to strong 2nd quarter earnings. We continue to suggest that investors stay close to their long-term target asset allocations with a slight defensive bias.

“Set your goals high, and don’t stop till you get there.”Bo Jackson

ND&S Weekly Commentary 8.16.21 – Markets finished Mixed on the Week

August 16, 2021 

Despite the surging delta variant, corporate earnings continue to be quite strong and resilient. Waning concerns about runaway inflation also buoyed investors’ confidence. Additionally, stocks got a bump from the Senate’s passing of a $1 trillion infrastructure bill (hopefully the House will vote on that separate bill soon).

For the week, the DJIA gained 0.87% while the S&P 500 moved ahead by 0.71%. The tech-heavy Nasdaq lost 0.09%. International markets finished in the green. For the week, the All Country World Index ex-USA finished higher by 0.71% while emerging market equities (MSCI EM) gave back 0.90%. Small company stocks, represented by the Russell 2000, dropped 1.10% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, advanced 0.11% for the week as yields moved lower. As a result, the 10 YR US Treasury closed at a yield of 1.29% (down 2 bps from the previous week’s closing yield of ~1.31%). Gold prices closed at $1,775.20/oz – up 0.86% on the week. Oil prices continued their march higher to close at $68.44 per barrel, up 0.23% on the week.

Markets have been quite resilient despite myriad concerns. We see markets grinding along (higher and lower) over the new few months during this seasonally weak period. We continue to suggest that investors stay close to their long-term target asset allocations with a slight defensive bias. Enjoy the summer!

“Happiness is not a goal; it is a by-product.” – Eleanor Roosevelt

ND&S Weekly Commentary 8.2.21 – A Midsummer Night’s Dream

August 2, 2021 

Concerns over the strength and duration of global economic growth sent the major U.S. equity markets lower last week. The spreading Covid-19 Delta variant, mixed economic news, supply chain disruptions and peaking corporate earnings are weighing heavily on investors’ minds.

For the week, the S&P 500 and the DJIA were down 0.4% and the tech-heavy Nasdaq lost 1.1%. Small US stocks, as measured by the Russell 2000, outperformed and gained 0.8%. International developed stocks (MSCI EAFE) rose 0.6% while emerging markets (MSCI EM) continue to be affected by China’s regulatory crackdown on Tech companies and dropped 2.5%. Chinese companies represent over 30% of the emerging market equity benchmark. Gold prices closed at $1,826/oz. – up 0.6% on the week and oil prices increased 2.8% to $73.81 per barrel.

So far 87% of companies in the S&P500 have exceeded estimates by 18% buoyed by strong consumer demand and improving margins. It will be another busy week as 142 companies, comprising the S&P 500, are scheduled to report. The materials (2.8%) and energy (1.6 %) sectors were the best performing sectors last week.

On the economic front, the advanced estimate for Q2 GDP soared 6.5% but missed consensus of 8.4%. Consumer spending, which is about 70% of demand, has been very strong, growing at 11.8%. The Federal Reserve met last week and made no changes to its policy rates or open market asset purchases. Fed Chairman Jerome Powell acknowledged that the “economy has made progress” but the Fed will continue buying $120 billion in bonds every month for at least a little longer. As a result, the 10 year U.S. Treasury declined to 1.23%, down 6bps from the previous week.

This week will include another round of 2Q earnings announcements and economic releases on construction spending, hourly wage growth, and consumer spending.

“Our doubts are traitors, And make us lose the good we oft might win, By fearing to attempt.” –William Shakespeare