Major US equity indexes closed the first half of 2021 at or close to record highs. Interestingly, fewer, and fewer stocks are driving these gains. As the S&P 500 touch record highs, the percentage of companies within the index making individual new high stands at just 4%.
The S&P 500 has notched gains in 5 consecutive months finishing the first half of the year up 15.2%. Small caps stocks have outperformed in 2021, led by The Russell Microcap Index (up 29% YTD). The Russell 2000 is up 17.50% YTD. The Nasdaq 100 is up 13.3% YTD.
Energy (+45% YTD), Financials (+26% YTD) and REITS (+22% YTD) are all top performers in the first half of 2021. Interestingly these sectors were the worst-performers in 2020. This fact reinforces our philosophy of investing. Consistent re-balancing of a well-diversified portfolio is the best method to achieve long term capital appreciation.
As we spoke about in our May newsletter, inflation concerns are still a point of concern for the markets. In June, the Core Consumer Price Index (CPI) notched its highest increase since 1982. ISM (Institute for Supply Management) prices paid index rose to 92.1, the highest reading in over 30 years. The graph below highlights the rapid acceleration.
Despite rising input costs, higher commodity prices and a tight labor market the Federal Reserve still feel this increase in inflation is “transitory”. The rapid pace of growth has strained supply chains. Additionally, there are significant difficulties matching millions of unemployed workers to available jobs. Most economists concur with the Fed’s viewpoint and expect these issues to be resolved over time. We are keeping a keen eye on this as prolongated inflation readings that are not transitory could push the Federal Reserve to increase overnight rates at a more accelerated pace. The June FOMC (Federal Open Market Committee) meeting unveiled two unexpected rate hike projections in 2023. The market is pricing in the first overnight rate increase sometime mid next year.
Jeremy has been in the financial advisory business since 2005 after graduating from Fordham University’s School of Business. He joined Tomoro as a managing partner in 2014. During his tenure, Jeremy has consistently excelled as an advisor in both the personal household and business planning arena. As a managing partner, Jeremy also serves as a mentor to all associates and is hands-on in supporting Tomoro’s growth planning. He has completed various curriculums and certifications, such as New York University’s graduate studies in financial planning, is a Certified Exit Planning professional, and Investment Advisor Representative. He and his family reside in Colts Neck, NJ.
Registered Representative and Financial Advisor of Park Avenue Securities and Financial Representative of Guardian, AR insurance license #8401385 CA insurance license #0F94382
The S&P 500 Index is a market index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. The Hang Seng Index (HSI) is a market-capitalization-weighted stock market Index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.
Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. Equities may decline in value due to both real and perceived general market, economic, and industry conditions.
Statistics sources from Central Bank Rates and Bloomberg.
2021-115741 Exp 2/23