Markets Mixed as Retail Sales Impress

• Markets were mixed last week as the technology and consumer discretionary sectors drove returns. We saw global markets (represented by the MSCI All Country World Index) down -0.2% and domestic stocks (represented by the S&P 500 Index) up 0.4%. We saw U.S. small companies (represented by the Russell 2000 Index) lag in the market, being down -2.8%.
• The major economic news of the week was the Commerce Department’s announcement that retail sales grew 1.7% in October, which was the largest monthly gain since March of this year. While inflation in some areas of the economy can be partially to blame, all signs point to consumers starting their holiday shopping early.
• Something we haven’t discussed with all of the Federal Reserve activity is that President Biden needed to decide on whether to retain Jerome Powell as Fed Chair or to look somewhere else. The primary contender was Lael Brainard, who is a current Fed Governor. While in practicality, the actions of the Fed wouldn’t be extremely different regardless of who is the Fed Chair, the market has been moving based on expectations. Fed Governor Brainard is seen as more “dovish,” so her candidacy caused markets to rethink the Fed interest rate trajectory (slower interest rate increases than if Powell would stay on). It was announced this morning that Powell would stay on to lead the Fed and we’ll see the market adjust accordingly. As I mentioned earlier, our expectations weren’t going to change too much regardless of who was picked.
• Rising COVID-19 cases in Europe are something to keep an eye on moving forward. It was announced last week that Austria would go back into a national lockdown and that Germany is considering the same thing.
• Wednesday this week will be full of economic reports. We’ll see weekly unemployment claims, third-quarter GDP estimates, minutes from the last Federal Reserve meeting, and the consumer sentiment index report.
• I saw the below chart from Factset and Edward Jones over the weekend and thought it paints a good picture of the last few years. Markets have been very strong and have consistently hit record highs. Through last week, the S&P 500 hit 66 record daily closes during 2021, which only trails 1995 as the most in a calendar year since the early 1970s. This is just a good reminder of staying patient, letting your portfolio do its job over time, and to remain diligent in sticking to your risk tolerance over the long-term.

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.