Broker Check

Market Commentary

September 2021


S&P 500, Nasdaq, and Dow post record highs in August
despite Covid-19 Delta variant and Fed concerns

August was another record setting month for US stocks, or at least the large-cap S&P 500, Dow Jones Industrials, and tech-heavy Nasdaq. Nasdaq paced all markets with a 4% gain in August as mega-cap technology stocks played catch-up from underperforming earlier in the year, while the S&P 500 rose 2.9%. Nasdaq and the S&P 500 finished August up 18.4% and 20.4% for the year, respectively. Small-caps, as measured by the Russell 2000, played some catch-up as well, jumping 2.1% after a very rough July. Mid-caps also posted strong gains for the month adding 1.8%, and while the Dow Jones Industrials notably lagged with a 1.2% return, it still hit a record highs mid-August. The major US indexes all finished August with solid double-digit gains for the year.

News was mixed during the month, adding to investors’ wide-ranging sentiment. A weaker-than-expected University of Michigan consumer sentiment reading amid rising Delta variant Covid-19 cases, as well as July’s 5.4% Consumer Price Index (CPI) reading, which was the strongest since August 2008, and the Fed’s hot 3.6% CPE inflation index reading balanced against the US Department of Labor’s better-than-expected Employment Situation Report released in August, and 6.6% annualized Q2 GDP estimate from the US Department of Commerce. The unemployment rate dipped to 5.2% in August, though job growth late in August disappointed.  

The Senate passed a $1 Trillion bipartisan Infrastructure bill and Senate Democrats passed a $3.5 Trillion budget resolution. However, it could be months before the House votes on final legislation.

Overseas, stocks rose in August for both developed and emerging markets. The benchmark MSCI EAFE index gained 1.5% and the MSCI Emerging Markets Index added 2.4%, following a terrible July.

The markets were focused on the Fed for most of August as the Kansas City Fed’s annual Jackson Hole symposium was held virtually August 26-28, when global central bankers, economists and academics meet to discuss economic and monetary policy. Fed Chair Powell’s speech garnered most of the attention as he noted that while “substantial further progress” has been made toward reaching its employment and inflation goals, the recent Covid-19 Delta variant “presents a near-term risk.” The markets reacted positively to the comments, suggesting rate hikes would likely be delayed further out, though Powell noted the tapering of Fed asset purchases will still likely start before the end of this year. The September 21-22 meeting could be the earliest to announce the timing of the start. Bond yields edged slightly higher for the month with the 10-year T-note yield rising 0.06% to close at 1.30%. While the Bloomberg Barclays Aggregate Bond index slipped 0.2% to close -0.7% YTD.

August Quick Takes

  • US stocks rose across the board in August, with the Dow, S&P 500, and Nasdaq hitting multiple new all-time highs, despite rising Covid-19 Delta variant cases and hospitalizations
  • Tech-heavy Nasdaq led in August surging 4%, while small-caps rebounded from a rough July gaining 2.1%
  • Nervous global markets responded positively to Fed Chair Powell’s more cautious comments at the annual Jackson Hole (virtual) symposium, though tapering will likely start this year
  • Q2’21 corporate earnings have widely beaten expectations, +16.4% on average, with 89% of the 98% S&P 500 companies reported (Nasdaq)
  • Stocks gained overseas as well with developed foreign markets rising 1.5%, and emerging markets rose 2.4%, after a dour July
  • Interest rates rose slightly in August amid rising inflation concerns and Fed tapering plans
  • Unemployment dipped to 5.2% in August and the Senate passed a $1 Trillion bipartisan Infrastructure bill that will move to the House for a vote, potentially with an additional $3.5 Trillion Biden Administration budget resolution spending bill

September Update

US stocks have stumbled to start September, historically a bumpy month. Amid some economic growth downgrades for Q3 and 2021 as a whole, stocks have pulled back modestly 1.0% to 2.4% from August record highs. Rising Covid-19 cases and hospitalizations have dampened consumer confidence. Further, some hot inflation numbers have rekindled Fed tapering worries and interest rates have edged higher. Overseas, developed markets are up 1.1% to start September, while emerging markets are flat.

Never Forget

As the nation commemorated the 20th Anniversary of the horrific terrorist attacks on 9/11/2001 this Saturday, we join with all Americans to Never Forget those nearly 3,000 lives lost at Ground Zero, the Pentagon, the heroes of Flight 93, and the first responders who risked, and those who lost, their lives trying to save others.

The Outlook

The Fourth Quarter of 2021 and year end planning is just around the corner. But we still need to finish Q3 and the markets in September are off to a bumpy start. Our Outlook, however, remains cautiously optimistic.

  • The Year of Transitions continues to progress but rising Delta variant Covid-19 cases among the unvaccinated remains a growing concern, especially as schools and colleges start
  • US corporate earnings growth expectations for Q3 are 27.9%, according to FactSet, and remain strong for the remainder of 2021 (FactSet)
  • Volatility remains in the forecast; valuations remain stretched, and a pullback/consolidation or correction would not be a surprise but refrain from changing course
  • Two biggest Market Risk Factors remain: a surprise change in Fed policy (start taper earlier and more aggressively than expected) and the Covid-19 Delta variant among the unvaccinated reversing reopening progress, followed thirdly by potential tax-reform coming
  • Maintain diversification, discipline, and keep your focus long-term
  • Refrain from chasing returns and making large portfolio changes
  • Maintain regular contributions and a rebalancing program

Call your Nelson Advisor today at 800-345-7593 to discuss any concerns and review your portfolio.

~Your Nelson Securities Team

 *Past Performance is No Guarantee for Future Results