Market Commentary — July 19, 2021

US equities were lower this week, with the S&P 500 down after three weekly gains including a fresh all-time high on Monday. Growth modestly outpaced value names.

So why the market sell-off? Investors see heightened drawdown risk with looming Fed tapering, stretched valuations and sentiment indicators, stickier inflation, and coronavirus variants among areas of concern.

Consumer prices jumped another 0.9% in June, roughly twice the consensus, marking the fastest 12-month increase in the core rate at 4.5% since 1991. While Chairman Powell’s testimony may have soothed the markets, many market pundits remain concerned that inflation remains a sticky, gooey mess.

Retail sales beat expectations, rising 0.6% in June, well above consensus for a 0.4% decline. Consumers appear to be shifting purchases away from pandemic economy items like home goods, toward reopening purchases such as restaurants, leisure, and apparel.

President Biden is expected to reappoint Jerome Powell for a second four-year term starting February of next year according to Reuters.

And finally, ETFs had the best first half of inflows on record. ETFs are at $488.5 billion and counting and will likely break the $497 billion full-year record in short order. Hidden in those inflows is the historic capitulation of mutual fund managers and investors as investors continue to migrate to the cheaper, easier-to-trade, more tax-efficient vehicle.

Vanguard leads the way, but almost all of the top 25 asset managers in the U.S. now offer ETFs or plan to do so. Capital Group is the latest to announce it was “joining the club.”

Have a wonderful week!

Jane Edmondson
CEO and Co-Founder

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