Watch the CPK Market Action Report: September 2021
Equity markets experienced more pronounced volatility early on before mounting a late month rally to close out at new all-time highs. Could this be a sign of an even stronger year-end rally to come, or will the Fed and their potential tapering dampen that hope and enthusiasm?
Watch the Market Action Report now:
September 2021
INTRO TAG
Equity markets experienced more pronounced volatility early on before mounting a late month rally to close out at new all-time highs. Could this be a sign of an even stronger year-end rally to come, or will the Fed and their potential tapering dampen that hope and enthusiasm?
That action starts, NOW!
INDEX PERFORMANCE RECAP
Equity markets sustained their bumpy ride higher in the month of August. After experiencing a mid-month decline, all of the indexes were able to rally through the end of the month with the Dow Jones Industrial closing up .98% and the S&P 500 up 2.66%. However, the Nasdaq took the top spot closing up 3.73%, a new all-time high for the index.
EQUITY UPDATE
Much like last month, stocks have been able to stave off any negative action considering the obvious loss of momentum in the recovery due to the Delta variant. Unless Covid gets materially worse, it should not evolve into a major threat to the overall economic recovery or the bull market for the medium to longer term. However, I would be cautiously optimistic at how much higher the markets can go from here before they need to take a breather, as valuations in my opinion have become pretty stretched.
BOND UPDATE
Treasuries yields also experienced a mid-month decline before finding a way to close higher. Depressed global yields have been a drag on U.S. Treasuries for some time now and that’s not normal. If the EU economy can actually start to grow again and actually sustain anything close to normal inflation, the U.S. Treasury yields might find some relief and go higher as we are expecting them to do.
COMMODITY UPDATE
Crude oil plummeted for most of the month to a low of $62 before rebounding back to within arms distance of where it started, closing out at $68.28. Energy traders will be keeping a close eye on refining activity in the Gulf Coast region returning to normal. Unless we get any major news that refining activity will remain offline for multiple weeks, then we should see energy markets remain fairly steady into this week’s OPEC+ meeting and the job’s report.
Copper also sold off during the first half of the month before settling in just above $4.30 at month end. Although, it has been in a broad trading band of $4 and $4.60, the path of least resistance seems to be higher given the positive outlook on growth in conjunction with an accommodative Fed policy.
Gold had a solid rebound back to where it started the month after dipping under $1740/oz. The path of least resistance here is definitely higher with and upside target of $1900/oz. However, if inflation becomes too hot or if the Fed has an abrupt hawkish shift in their accommodative policy, gold prices will get hit hard.
CURRENCY UPDATE
The dollar bounced to the higher end of its $91-$93 trading range at the beginning of the month before settling just above $92.60 at month end. It is likely we will continue to see the dollar trade in this range for a while, unless we see some material surprise in the expected start of QE tapering plans of the ECB, U.S. Fed, Bank of England, Bank of Canada and so on in late 2021 or early 2022.
ECONOMIC UPDATE
Weekly jobless claims edged slightly higher in the last week of August up 4,000 to 353,000 over the previous week’s report of 349,000. However, the 4-week average fell to a new pandemic low of 366,500. Unemployment also posted a new pandemic low of 2.68 million, a decline of 10,ooo from the previous week. With both reports posting new pandemic era lows, this continues to point to a slow and steady trend of continued improvement in the health of the labor market.
THE WRAP
Well, the time for the Jackson Hole Economic Symposium has arrived and just as I stated last month, Fed Chair Powell confirmed that the US economic recovery is on track to return to a strong labor market and the central bank could begin to withdraw its stimulus measures by year end. However, he stressed that there was no hurry to raise the benchmark lending rate.
Basically, the FOMC will discuss a gradual tapering of QE in their next meeting in September and continue through year end. I would bet this will have little to no impact on the markets as it really just reinforces the much-anticipated December tapering of $15 billion per month.
CPK FOCUS
For the month of September, our models continue to hold a 30% cash allocation. Our broad focus remains on Domestic Equities and Commodities.
For Domestic Equities, our attention has been reduced to just Small Cap Growth and Mid Cap Growth with continued emphasis on the Consumer Cyclicals, Technology, Industrials, Financials and Basic Materials.
As for Commodities, our focus remains on Energy and Industrial Metals.
CPK DISCLAIMER
As a reminder, my current allocation is not a recommendation. Regardless of what happens next, investors like you need to have a simple and yet solid financial plan that reduces RISK, COSTS and TAXES while securing the necessary income you need to maintain your lifestyle throughout retirement.
If you don’t have a plan OR you’re not comfortable with the plan you have, call me today to get pointed in the right direction.
I’m Chad Kunc and that puts a wrap on the September 2021 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.
And that action starts, NOW!