- Stocks were negative across the board last week. We saw global markets (represented by the MSCI All Country World Index) down -1.9% and domestic stocks (represented by the S&P 500 Index) down -1.9%. It was U.S. small companies lagging the pack for the week, posting a -4.2% return (represented by the Russell 2000 Index).
- The focus last week was the outcome of the Fed’s two-day meeting. Fed officials see a strong economic recovery in action and are talking about reversing some of the very accommodative monetary policies in effect. The news wasn’t overly shocking, as policymakers now see interest rate hikes in 2023 (some didn’t expect it until 2024) and have increased their expectations of inflation for 2021. While they’re leaving interest rates and bond purchases at current levels, they’re now talking about tapering their asset purchase program.
- Within the U.S., we saw the more cyclical-heavy Dow drop over 3%, while the NASDAQ only fell about 1%. That highlights where the repricing really took place was in some of the cyclical sectors such as energy, materials, and financials.
- Oil continues its climb. It ended the week near $72 per barrel.
- An interesting report last week showed retail sales falling 1.3% in May. A further look at the data shows that consumers shifted spending towards entertainment, such as restaurants and travel.
- In this time of economic recovery from a pandemic-induced recession and accommodative monetary policy don’t be surprised if the Fed continues to force market repricing events. Over time, they’ll need to adjust their policy for interest rates and bond purchases, and investors will always need to adjust their expectations. We didn’t see the Fed’s report as overly surprising and, as we’ve seen over and over again, markets often overreact in both directions to big financial news.
- I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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