Global equities advanced in August for their seventh consecutive monthly gain, with concerns over the Delta variant outweighed by continued strength in the global economy. The S&P 500, a benchmark for large cap US stocks, gained +3.0% for the month and is now up +21.6% in 2021.
Smaller company stocks recovered from a rocky July for a +2.2% gain in August, with the Russell 2000 Index up +15.8% year-to-date. Overseas equities rallied +1.9% on the month for a +9.4% full-year return per the MSCI ACWI ex-US Index, as regulatory concerns out of China continue to dominate headlines abroad. Fixed income markets fell slightly, with the Barclays US Aggregate Bond Index declining -0.2% in August for a -0.7% return YTD. Interest rates ticked up modestly, with Chairman Jerome Powell reiterating at the Federal Reserve’s annual Jackson Hole Symposium their intention to begin tapering monthly bond purchases while holding short-term rates steady for the near future. Gold prices fell -0.6% for the month for a -3.9% return on the year.
We saw no changes in any of our proprietary “Three Dials” readings during the month of August, each of which are summarized below:
Through the end of August, the S&P had already achieved 53 new all-time highs, on track for a calendar year record, demonstrating the persistent upward trend for US stocks in 2021. With China as the notable exception, global equities continue to exhibit remarkable technical strength, and as such our Momentum Dial remains in a “Positive” position.
The global economic recovery marches on, with key leading indicators in the areas of manufacturing, employment and real estate all pointing to expansionary conditions. Our Fundamental Dial remains in a “Positive” position based on the current pro-growth landscape.
While high-priced growth stocks garner the bulk of investors’ attention, traditional value sectors such as Financials and Energy have led the S&P year-to-date. On balance, the market remains at historically high multiples, which leaves our Valuation Dial in a negative position.
Our Three Dials composite reading continues to take a “Cautiously Optimistic” view, as strong showings in the areas of Momentum and Economic Fundamentals are balanced by Valuation concerns.
Sources:
Morningstar
BBC
Treasury.gov
Bloomberg
Forbes
Conference Board