Monthly Market Review August 2021

By Andrew J. Willms

President and CEO, The Milwaukee Company 

Overview.

• The major stock market averages had a solid month in July, amid concerns about the economic recovery in the face of the rapid spread of the delta variant of Covid-19.

• U.S. second-quarter gross domestic product accelerated at a very strong 6.5% on an annualized basis, albeit considerably lower than the 8.4% economists had been expecting.  Consumer spending (which at 70% represents the lion’s share of demand) was stronger than expected, growing at 11.8%.

• Prices have risen at their fastest pace in 13 years as the recovery from the pandemic gains strength, but the markets seem to be suggesting that investors’ concerns about inflation are starting to wane.

Stock Market Highlights.

• The major stock market averages had a solid month in July, notwithstanding concerns about the economic recovery in the face of the spreading delta variant.

• The S&P 500 hasn’t fallen 3% or more from a record high since May, and hasn’t suffered a 5% pullback since October.

• A plethora of solid 2nd quarter earnings reports has bolstered hopes that the stock market can continue to trend higher in August.

Bond Market Highlights.

• The core personal consumption expenditures price index, which is the Fed’s preferred inflation measure, rose 3.5% in June year over year.  That’s the greatest such gain since July 1991.

• Investors seemed to ignore comments by Federal Reserve officials suggesting that they could start reducing their bond buying later this year, as interest rates resumed their downward trend in July.

• The Fed continues to assert that the inflation surge is largely a result of the economic reopening, as well as supply chain bottlenecks, and that the acceleration in the inflation rate be “transitory”.

If you would like to hear more from me on recent market developments, please use this link to subscribe to my weekly podcast.

Thank you for reading.