Monthly Market Insights from Bill Schiffman – July 2021
“Keep on truckin’ baby…”
We go back to Motown circa 1973 for this Eddie Kendricks hit, recorded about two years after he left his front man position with The Temptations. The lyrics were catchy in their simplicity and Kendricks’ lilting tenor carried the day. I guess that we can hope that the stock market keeps on truckin’ through the rest of the year.
The first half of 2021 was nothing short of remarkable. Most major equity indices gained double digits. Fixed income fared decently as the ten year Treasury remained stubbornly under the 1.5% mark even with the specter of rising inflation in our midst. Commodities like gold and oil performed positively. Volatility was minimal overall, with the exception of the cryptocurrency space which experienced several lurching moves. What does the rest of the year look like?
While the prime macroeconomic trends (low interest rates, consumer re-engagement, benign Federal Reserve policy, strong corporate earnings/balance sheets) remain in place, there are a few headwinds on the horizon. Possibly the most important of these is that COVID-19 continues to be a major story. America is in far better shape than the rest of the world on vaccination metrics. Even so, there are sharp divides in adoption, with several states risking relapse and possible shutdown in the fall or winter. The relatively new Delta strain of the Coronavirus is wreaking havoc worldwide. The optimism of last month is now tinged with caution. Perhaps the global economy will not rebound as quickly as predicted. If travel to Europe, for example, slows due to COVID concerns, rosy expectations for airlines and cruise lines could be dashed.
I mentioned inflation in the second paragraph. We can most assuredly feel it at the gas pump and the grocery store. That being said, shouldn’t we have been expecting inflation as the economy opens up? My take on things is that as long as interest rates remain favorable, there really are few alternatives for investments other than equities. If we get a garden variety correction during the slower summer months, I would look on that occurrence as an opportunity to put additional cash to work.
This is a deliberately short missive because I honestly don’t have much to say that’s different from last month. We just keep truckin’ along (in a good way). Stay safe… take care and have a terrific 4th of July holiday. We look forward to hearing from you soon.
The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Diversification cannot assure a profit or guarantee against a loss. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. Indices are unmanaged and do not incur fees. One cannot directly invest in an index.
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