Market Commentary — August 14, 2023

Stocks were mixed last week in light end-of-summer trading. Investors were wrangling with positive news on the inflation front, while long-term rates continue to move higher. Value stocks outpaced growth names, and mega-cap tech names sold off on rising rate pressures. Healthcare stocks got a boost from weight loss diabetes drugs. And financials took a hit on Tuesday when rating agency Moody’s downgraded many small and mid-cap banks over concerns about commercial real estate exposure.

On Thursday, CPI inflation data saw an increase of 0.02% in July, which brought the YOY number to a tepid 3.2%. But CPI enthusiasm quickly gave way to July’s PPI number released on Friday which came in at 0.03%, a tick above projections. On a year-over-year basis, producer prices rose 0.8%, marking the first annual increase in the rate of producer price inflation in over a year. The 10-year bond yield remains above 4%, where it has been since the beginning of July.

Markets remain nervous that last month’s Fed interest rate hike, won’t be the last. The Fed did little to calm those nerves as Fed Governor Bowman suggested more hikes might be needed, while Phillie Fed President Harker and Richmond Fed President Barkin, communicated they were in favor of a pause.

Much of the buzz in ETF land is about the prospects for a spot Bitcoin ETF. Cathie Wood’s Ark 21Shares application decision was pushed out by the SEC. And the WSJ pronounced that “Index-Tracking ETFs Were All the Rage, Until Now”. While active funds from sponsors such as Dimensional, JP Morgan, Capital Group, and American Century have indeed gotten traction, it hardly portends the demise of passive investing. Actively managed ETFs have an average expense ratio of 0.70% according to VettaFi, vs. 0.16% for passive funds. And besides cost considerations, there is also the issue of active underperformance.

Sorry to miss you last week as I vacationed with my family in Kauai. My week in paradise was quickly overshadowed by the disaster that ensued the day after we left, in Maui. I am sure many of us are looking for ways to help our Maui Ohana. Here is a link to the many services organizations stepping in to help in the wake of this senseless tragedy.

Jane Edmondson
CEO and Co-Founder

About

EQM Indexes LLC is a woman-owned firm dedicated to creating and supporting innovative indexes that track growth industries and emerging investment themes. Co-founded by Jane Edmondson, a former Institutional Portfolio Manager with more than 25 years in the investment industry.

Disclosure

The information provided on this page is for illustrative purposes only and is not intended to serve as investment advice. The information provided is as of particular time and subject to change at any time without notice.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. EQM Indexes does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. EQM Indexes Indices makes no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. EQM Indexes is not an investment advisor, and makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this article. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by EQM Indexes to buy, sell, or hold such security, nor is it considered to be investment advice.