Market Commentary — July 26, 2021

U.S. stocks rebounded during the week after a sharp Monday selloff. Early last Monday, the Russell 2000 Index of small-cap stocks was down 10% from its closing high on March 15, marking its first correction in more than a year.

The spread of the delta variant and peak economic growth concerns weighed on investors. So-called “reopening trades” such as cruise operators, airlines, and casinos, were hit hard along with energy stocks.

The market recouped most of its losses on Tuesday thanks in part to strong June housing numbers. It was also the second busiest week of earnings season with 81 of the S&P 500 Index companies scheduled to report results.

There were also earnings beats from Verizon Communications, Coca-Cola, Johnson & Johnson, and United Airlines, helping boost sentiment. Upside surprises from Twitter and Snap on Friday further helped drive gains in communication services stocks. But Netflix shares fell sharply on Tuesday, after once again reporting a larger-than-consensus decline in subscriber gains.

Low volatility ETFs remain in the doghouse and have not recovered since February 2020’s COVID-crash. And 2021’s ongoing bull rally has only added to performance and flow woes. Investors have withdrawn money from low-volatility strategies for the 17th month in a row, according to data compiled by Bloomberg. Part of the issue is that factor strategies like low vol are designed to work over prolonged periods, but any recent bouts of turmoil have been short-lived.

Earnings season continues this week with about 165 S&P 500 companies due to report in the biggest week of the earnings season, with tech heavyweights like Apple, Microsoft, and Alphabet reporting. The Fed is also meeting and GDP reports.

Have a great week!

Jane Edmondson
CEO and Co-Founder

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