The Bottom Line
● U.S. equities fell for the first time in four weeks. All the major US equity indices posted a negative return for the week, but still maintain healthy year to date figures.
● The 10-Year yield started the week on the upswing but couldn’t cross the 1.42 level. Ultimately, it resumed it’s decline and ended the week down -7 bps, settling at 1.29.
● The markets had plenty of economic news to digest this week with June inflation data releases, retail sales, labor market reports, and major US banks kicked off earnings season.
Dog Days of Summer
Markets are traditionally tepid during the summer months, and this summer might fall victim to the adage of the “Dog Days of Summer”. The S&P started the week just as it finished last week, carrying an increase of +0.49% up to Wednesday. This didn’t last as inflation metrics came out higher than expected and above consensus estimates on retail sales weren’t able to revive the indices on Friday. The Russell took the brunt of the selling pressure, posting a -5.12% loss for the week. Major US banks reported their earnings, top line numbers were propped up by robust investment banking division revenues, but other segments couldn’t boast similar results. Concerns over the spread of the delta variant continued to weigh on European equities with the STOXX 600 posting a -0.64% loss for the week. After a difficult week last week, Japanese equities were able to post a modest gain of +0.22% for the week. Volatility wasn’t only present in the equity markets, the 10-year yield sent investors on a ride with rates pushing higher at the beginning of the week, but the 10-year wasn’t able to surpass the 1.42 level and finally ended the week down -7bps to 1.29 as investors searched for a haven.
Digits & Did You Knows
IT’S DIFFERENT — The Federal Reserve measures inflation using the “Personal Consumption Expenditures” (PCE) price index while the government uses the “Consumer Price Index” (CPI) for the “cost of living adjustment” (COLA) to increase Social Security retirement benefits. The CPI gives “housing” prices a 42.1%weighting in its calculation, while the PCE gives “housing” just a 22.6% weighting. The CPI gives “medical care” prices an 8.8%weighting in its calculation, while the PCE gives “medical care” a 22.3% weighting. (source: Federal Reserve, BTN Research).
NOT JUST KIDS — 19% of Americans that have outstanding student loan debt from college are over age 50, i.e., 8.7 million borrowers out of 44.7 million total borrowers. (source Federal Reserve Bank of New York, BTN Research).
Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
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