Market Week: June 21, 2021

The Markets (as of market close June 18, 2021)

Stocks opened the week with mixed returns: The Dow, the Russell 2000, and the Global Dow lost value, while the Nasdaq and the S&P 500 rose. Tech shares and consumer services closed higher, while financials and materials fell. Anticipating the Federal Open Market Committee meeting later in the week, investors may have been waiting for cues from the FOMC on its inflation outlook. Yields on 10-year Treasuries advanced. Crude oil prices pushed passed $71.00 per barrel. The dollar was mixed to lower.

Last Tuesday saw stocks close mostly lower. The Nasdaq (-0.7%) and the S&P 500 (-0.2%) retreated from the previous day's gains, while the Dow and the Russell 2000 dipped -0.3%. The Global Dow was unchanged. Among the sectors, energy jumped 2.1%, industrials rose 0.5%, and utilities gained 0.4%. The remaining sectors fell. Crude oil prices climbed above $72.00 per barrel, the dollar was unchanged, while Treasury yields ticked slightly lower.

On Wednesday, Treasury yields climbed higher and stock prices fell as investors may have been influenced by the Federal Reserve's projection that interest-rate increases may be coming in 2023. Each of the benchmark indexes listed here fell, with the Global Dow and the Dow dropping 0.8%. The S&P 500 dipped 0.5%, while the Russell 2000 and the Nasdaq lost 0.2%. The dollar advanced, while crude oil prices declined but remain close to $72.00 per barrel. Consumer discretionary was the only sector to gain, inching up 0.2%. Utilities, consumer staples, industrials, and materials each declined by at least 1.0%

Tech shares pushed the Nasdaq 0.9% higher last Thursday, the only benchmark index to post a gain on the day. The Global Dow (-1.4%), the Russell 2000 (-1.2%), and the Dow (-0.6%) lost ground, while the S&P 500 closed slightly in the red. Treasury yields dipped as did crude oil prices. The dollar advanced nearly 1.0%. The market sectors were mixed. Besides technology, health care, consumer discretionary, communication services, real estate, and utilities gained, while energy, financials, materials, and industrials fell.

Melissa MinterJune 24, 2021

Overview

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The year began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year. Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.

While domestic economic growth may have slowed in 2019 compared to 2018, it showed resilience and stamina. The third-quarter gross domestic product expanded at an annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still strong enough to outpace global economic growth by a considerable margin. Consumer spending — which accounts for about two-thirds of the U.S. economy — surged, buoyed by a strong labor market, near-record unemployment, solid wage growth, and a burgeoning stock market. All told, the domestic economic expansion continued into its 11th straight year, the longest run in U.S. history.

Last year saw trade disputes between the United States and several of its trade partners reach an accord, but the trade war with China roared. The world's two largest economies engaged in a tit-for-tat skirmish, with each country volleying tariffs on their respective imports at the expense of the exporting nation. Coincidentally, a limited deal was announced just before the holiday shopping season, with the U.S. agreeing to forgo new tariffs and China assenting to allow more U.S. agricultural imports. Further negotiations are presumed, but the relationship between the economic giants remains tenuous at best.

Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.

The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth. The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year.

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Market Week: June 21, 2021

Overview

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