In Markets "In a Nutshell"

Markets “In a Nutshell” for June 21, 2021

Investment Week at a Glance

Stocks finished lower for the week.  The Dow Jones Industrial Average fell 3.40%, the S&P 500 was down 1.90%, and the NASDAQ fell 0.30%.  Foreign stocks (MSCI EAFE) were down as well, falling 0.60%.  Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 1.43%.  (Data source: Wall Street Journal)

Sideways Market

Despite some recent blips in volatility and a lot of economic data to analyze, domestic equities have been trading relatively sideways since April.  Last week, the most recent Fed meeting took center stage as the market digested its updated expectations for any updates/changes to its monetary policy.  The reason this meeting was of particular interest was due to the most recent inflation reading, which revealed core consumer price levels were increasing at their fastest pace in over 20 years.  As a result, the Federal Reserve increased its inflation expectations.  In addition, verbiage revealed a slightly more hawkish (aggressive) view toward 2023 interest rate hikes.

Hawkish Fed

Domestic stocks fell last week as a somewhat surprisingly hawkish result from the most recent Federal Reserve policy meeting.  In addition, later in the week, a Fed official warned about the potential for earlier than expected rate hikes.  Cyclical stocks bore the brunt of these comments, as they are most reliant on economic growth.  Alternatively, the technology heavy NASDAQ outperformed, suffering a most modest loss for the week.

Large cap stocks outperformed small cap stocks.  Growth oriented stocks vastly outperformed value oriented stocks (+0.25% versus -4.13%) as investors decided to sell companies in the financial and energy sector amid rate hike fears.

Quiz:

Quiz

How long has it been since we’ve seen a 5% pullback in domestic equities? (Scroll Down for Answer)

 

  1.    2 weeks
  2.    3 months
  3.    6 months
  4.    8 months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

   4.   8 months.  We haven’t experienced a 5+% pullback in over 8 months.  To put this into perspective, the market, historically, averages 3 such pullbacks every year.