Market Week: June 7, 2021

The Markets (as of market close June 4, 2021)

Stocks were mixed last Tuesday to begin the holiday-shortened week. The Russell 2000 climbed 1.1%, the Global Dow added 0.6%, and the Dow eked out a 0.1% gain. The Nasdaq and the S&P 500 each dipped 0.1%. Yields on 10-year Treasuries, the dollar, and crude oil prices advanced. Energy gained nearly 4.0% as the OPEC+ alliance agreed to increase output in July. Real estate and materials also advanced more than 1.0%, while health care fell 1.6%. European markets closed higher for the fourth consecutive month as economies continue to show signs of recovery from the pandemic.

Stocks closed last Wednesday slightly higher as investors awaited the release of important employment data due later in the week. The energy sector continued to climb as crude oil prices jumped 1.5%, reaching $68.75 per barrel. Real estate, consumer staples, technology, utilities, and financials were the other market sectors to post gains. Materials dipped 0.9%. The Global Dow led the benchmark indexes, up 0.4%. The S&P 500, the Nasdaq, the Dow, and the Russell 2000 were little changed. Treasury yields fell, while the dollar was mixed.

The downward trend in unemployment claims wasn't enough to spur the market last Thursday. Each of the benchmark indexes listed here lost value, with the Nasdaq (-1.0%) and the Russell 2000 (-0.8%) leading the decline. Treasury yields, the dollar, and crude oil prices advanced. The market sectors were mixed, with utilities, consumer staples, health care, energy, and financials gaining, while consumer discretionary, technology, and communication services dropped.

Melissa MinterJune 8, 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 7, 2021

Overview

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