Weekly Market Update 9/6/2021
by Justin Long, on Sep 06, 2021
I hope everyone has had a safe and fun holiday weekend so far. It was projected to be a busy one here in Las Vegas, with hotel bookings exceeding even pre-pandemic levels for the three-day weekend.
According to the Department of Labor's website, Labor Day is an annual celebration of the social and economic achievements of American workers. The holiday is rooted in the late nineteenth century, when labor activists pushed for a federal holiday to recognize the many contributions workers have made to America’s strength, prosperity, and well-being. That remains absolutely true and worthy of celebration, especially after these last 18 months.
Our family spent the weekend relaxing at home, with morning picnics at the park with our boys. I hope you were able to spend your time doing something you enjoy as well.
And now on to the recap of this week:
Weekly Market Summary
The S&P 500 and Nasdaq recorded the bulk of this week's gains on Monday, inching to fresh record highs as the week went on.
The start of the new month brought the release of manufacturing and non-manufacturing surveys from major economies. Most of these surveys showed a deceleration in activity while China's Caixin manufacturing and non-manufacturing fell into contraction, prompting speculation about more easing. Meanwhile, manufacturing and non-manufacturing surveys from the U.S. remained in expansionary territory.
Friday's release of the Employment Situation report for August muddled the economic picture for the U.S., as nonfarm payrolls increased by just 235,000 while the Briefing.com consensus expected growth of 750,000. The headline miss was coupled with a 0.6% increase in average hourly earnings, which was well ahead of the 0.3% increase expected by the Briefing.com consensus.
Seven sectors ended the week in positive territory with gains ranging from 0.9% (technology) to 4.0% (real estate). On the downside, financials (-2.5%) and energy (-1.4%) finished at the bottom of the leaderboard while materials (-0.9%) and industrials (-0.4%) recorded slimmer losses.
Jobs Come in to focus on the recovery front
Nonfarm payrolls (chart) rose by 235,000 jobs month-over-month (m/m) in August, well below the Bloomberg consensus estimate of a 733,000 rise, though July's figure was upwardly-adjusted to an increase of 1,053,000. Excluding government hiring and firing, private sector payrolls increased by 243,000, versus the forecasted rise of 610,000, after increasing by an upwardly-revised 798,000 in July. The labor force participation rate remained at July's 61.7% rate, compared to forecasts of an increase to 61.8%. The Department of Labor said job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services, while employment in retail trade declined over the month and leisure and hospitality job growth was unchanged after increasing by an average of 350,000 per month over the prior six months.
The unemployment rate decreased to 5.2% from July's 5.4% rate, in line with expectations. The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—fell to 8.8% from the prior month's 9.2% rate. Long-term unemployed—those jobless for 27 weeks or more—fell by 246,000 but is 2.1 million higher than in February 2020, and permanent job losers dropped by 443,000 but is 1.2 million higher than in February 2020.
Average hourly earnings jumped 0.6% m/m, north of projections for a 0.3% increase, and versus July's unadjusted 0.4% rise. Y/Y, wages were 4.3% higher, north of the 3.9% forecast. Finally, average weekly hours remained at July's downwardly-revised 34.7, versus expectations of a modest increase to 34.8.
Fall May Not Bring the Fall
- The S&P 500 has risen more than 20% year-to-date, making 2021 the ninth year since 1991 in which the stock market was up more than 10% by Labor Day1. The market posted an additional gain from September to year-end in each of those instances, averaging another 8.8%1. This highlights the inertia of a strong bull market; however, we expect returns to be more modest as we advance.
- Strong corporate earnings growth this year has supported market gains, while at the same time reining in elevated valuation (price-to-earnings) levels. With the sharp jump in earnings and with profit margins at record highs, expectations are for nearly 10% earnings growth again next year. This should form a solid foundation for equity-market performance, even as economic growth simmers from a boil and monetary-policy spigots slow their flow.
Source: Bloomberg, S&P 500 price return 1991-2021. Past performance is not a guarantee of future results. The S&P 500 index is unmanaged and cannot be invested in directly.
As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat.
Justin J. Long CFP®
Diazo Wealth Group
Upcoming Economic Calendar
Source: 1. FactSet
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.
Innovative Adviser Solutions, LLC, a registered investment adviser, dba Diazo Wealth