As we enter into August, the stock market continues its upward trend, shaking off any doubt as the Delta variant numbers continue to increase. As the economy continues to grow, the fed has remained consistent with the idea that the economy is still recovering and that inflation is temporary.

Let’s look at all of what I just mentioned as well as a look at the stock market over the past month.

For the pandemic, unless you haven’t seen the news or you are avoiding all of your friends who are experts in every topic on social media, the numbers have increased with Covid and mask restrictions are coming back for many parts of the country. Last year when this happened, the market went the opposite direction of what we like to see. This time around, it seems as though people are a bit more optimistic based on the market growth from the past month.

With the overall economy, during July, the numbers for the US GDP were released sharing the rate between April and June. Remember that US GDP is the US Gross Domestic Product, which measures the value of all finished goods and services produced in the US. The total was an annualized growth rate of 6.5%, showing strong growth. Interestingly enough, the rate did not beat expectations, even though the US economy has now surpassed the pre-pandemic level.

Earlier in the year, we saw the long-term US Treasury rate increase, which had a negative impact on long-term treasury bonds. With rising inflation, one would think that the rate would continue to increase, but it has actually fallen over 30% since it’s high in March. This decline provided a boost for bond returns for July, though the earlier rise in rates left bonds with not much to report year to date.

Also in July, the Fed held a meeting to share more on what their plan was to keep a stable economy. At this time and for the near future, the Fed plans to keep rates near zero. As for inflation, as I had mentioned, the Fed continues to remain optimistic that inflation is temporary. Some supporting factors for the Fed’s thoughts on temporary inflation are the issues with supply and demand across multiple industries. Two industries that have seen rapid increases are real estate and the auto industry. Many people have been buying homes, which has led to high demand and low inventory. For the auto industry, vehicle manufacturers have had limited new car inventory due to chip shortages, which has made the demand for used vehicles much higher. As supply comes more available, each of these industries, as well as other industries, should see prices remain steady or decrease instead of a rapid increase.

As we continue on through the second half of the year, we remain positive on the long-term markets, though a bit more of a bumpy ride could be on the horizon. As the pandemic continues, any government intervention as we saw last year could create a pullback. Also, at this time, the US market has not seen more than a 5% drawdown since October of 2020. This information is never to create fear, but more to prepare for what could be to come. For those still investing for retirement, a downturn creates a great buying opportunity and for our clients near or in retirement, we continue to rebalance your portfolios to align with your goals and financial plan.

For the month of July, the S&P 500 finished +2.38%, Dow +1.34%, Nasdaq +1.19%, MSCI EAFE +.75%, MSCI Emerging Markets -6.73% and Barclays US Aggregate Bond Index +1.12%.

Please remain safe and reach out if you have any questions.