The US markets rounded out September by snapping the 7-month winning streak for US stocks. After having a strong August, up 3% for the S&P 500, we finished September down -4.7% (month-over-month). September was also full of sensational headline news around the looming debt ceiling, the Evergrande debacle, and the global energy crunch and rising oil prices. Also a lot of current headlines contain the word ‘stagflation,’ but what is stagflation?
U.S. stocks, for the most part, led the way as the S&P 500 breached the 4,500 price level for the first time and returned 3% for the month. Oil prices fell driven by supply-demand concerns, resulting in energy being the lone S&P 500 sector with a negative return.
Many broad market indexes posted positive returns for the month of July with some U.S. indexes hitting all-time highs. However, recent trends favoring the ‘vaccine trade’ areas of the market have reversed for the month with energy taking a step back, large cap catching up and growth outperforming its value counterpart.
For some areas of the U.S. economy, activity is now back above pre-Covid levels. Economic activity within China surpassed pre-Covid trend estimates sometime last year, and momentum is picking up in Japan and Europe.
Continued progress on the vaccination front and the subsequent reopening of communities provided optimism for sustained economic recovery. However, concerns that inflation could surge serving as a barrier to a fully rehabilitated economy resulted in more modest returns this month.
Monetary and fiscal policy accommodations and the continued escalation of vaccination distribution efforts fueled gains on the economic data front, exemplified by first quarter U.S. GDP growth of 6.4%. An increasingly clarified path toward normality and a strong start to earnings season bolsters our guardedly optimistic posture toward risk assets, restrained by somewhat elevated valuations, pandemic hotspots, and tax policy considerations.
U.S. Capital Wealth Advisors Form CRS