Signs of an improving labor market, strong corporate earnings, and more clarity from the Fed on its tapering plans propelled
stocks to multiple record highs during August.
The Dow Jones Industrial Average gained 1.22 percent while the Standard & Poor’s 500 Index rose 2.90 percent. The Nasdaq
Composite led, picking up 4.00 percent.1
Corporate profits in the second quarter were by all measures exceptional. With 98 percent of companies in the S&P 500 index
reporting, 89 percent beat Wall Street consensus estimates by an average of 17.7 percent. The companies posted an earnings per-share growth of nearly 92 percent over the second quarter of 2020.2
The labor market also showed signs of improving health, providing evidence that the economic recovery remained intact. In
August, jobless claims reached pandemic lows, while employers added 953,000 jobs in July, and job openings reached record
Fed at Center Stage
In the final days of trading, Fed Chair Jerome Powell stated that the Fed might begin to pare back its monthly bond purchases
before year-end. Powell’s update followed multiple comments from regional Federal Reserve Bank presidents indicating their
support for reducing bond purchasing. It’s important to note that Powell said that tapering should not be seen as an indicator
of future changes in interest rates.4
The month was not without its worries. The global spread of the Delta variant resulted in flashes of investor anxiety that led to
temporary pullbacks in stock prices. New COVID-19 cases in the U.S. rose throughout August, raising concerns that spreading
infections could derail the economic recovery.5
In Asia, outbreaks closed some shipping ports. Vietnam partially halted manufacturing, and Japan extended its lockdown
protocols. These actions raised concerns about their supply chain impact and what it may mean for inflation and economic
For the second straight month, energy was the only industry sector under pressure. Energy lost 1.34 percent in August.
Otherwise, gains were posted in Communication Services (+3.52 percent), Consumer Discretionary (+1.54 percent), Consumer
Staples (+0.83 percent), Financials (+5.28 percent), Health Care (+2.45 percent), Industrials (+1.39 percent), Materials (+2.19
percent), Real Estate (+2.20 percent), Technology (+4.1 percent), and Utilities (+4.02 percent).6
T I P O F T H E M O N T H
If you’re shopping for a homeowner policy, feel free to ask for a discount. If you can demonstrate that you are taking steps to manage risk, you may be able to negotiate one.
What Investors May Be Talking About in September
Since the early days of the pandemic, Fed Chair Jerome Powell has maintained that accommodative monetary policies would
remain unchanged until the economy recovered. He’s been clear that the Fed would be very transparent in communicating
monetary policy changes well ahead of implementing them to allow the capital markets sufficient time to digest any change.
Comments by a number of Federal Reserve Bank regional presidents last month may have heralded the beginning of a
First, the Federal Reserve Banks of Atlanta and Richmond made comments, suggesting that the time to begin tapering was
nearing. This was followed days later by remarks from the Federal Reserve Banks of Dallas and Kansas City, indicating that the
economy had progressed enough to commence tapering as early as October.7,8
Talk of tapering grew louder with the August 18th release of the FOMC (Federal Open Market Committee) meeting minutes,
suggesting that the Fed may be ready to scale back its bond purchases before year-end.
Finally, a speech by Fed Chair Jerome Powell near the end of the month confirmed that the Fed was getting closer to the start
of tapering. Powell indicated that tapering could begin before year-end in his prepared comments, though he cautioned against
connecting tapering with an interest rate hike.9
For many market observers, the Fed appears to be signaling that its September meeting may lead to changes in language and
policy. The two-day meeting ends on September 22nd.
A strong U.S. equity market helped push international stocks higher, with the MSCI-EAFE Index advancing 1.60 percent in
In Europe, Germany tacked on 1.87 percent, the U.K. added 1.24 percent France picked up 1.02 percent.11
The Pacific Rim markets were mixed. Japan rose 2.95 percent and Australia rose 1.92 percent. But China’s Hang Seng index
and Korea’s KOSPI edged lower.12
Gross Domestic Product: The pace of economic growth in the second quarter was revised upward slightly, from 6.5 percent
to 6.6 percent annualized rate.13
Employment: Employers added 943,000 new jobs in July—the biggest jump since August 2020. The unemployment rate fell to
5.4 percent, down from June’s 5.9 percent rate.14
Retail Sales: Retail sales cooled in July, falling 1.1 percent, led by a decline in auto purchases. Retailers attributed the weakness
to the spread of the Delta variant.15
Industrial Production: Output at the nation’s factories, mines, and utilities rose 0.9 percent, led by a 1.4 percent rise in
manufacturing production. July’s result topped the consensus estimate of a 0.5 percent increase.16
Housing: Housing starts slid 7.0 percent as challenges with land, labor, and materials persisted.17
Existing home sales rose 2.0 percent as limited inventory and strong demand drove the median price higher by nearly 18
percent to $359,900 from July 2020.18
For the first time in four months, new home sales rose, increasing 1.0 percent as the median sales price jumped 18.4 percent
to a record level of $390,500.19
Q U O T E O F T H E M O N T H
“Perform at your best when your best is required. Your best is required each day.”
– JOHN WOODEN
Consumer Price Index: Consumer prices climbed at their fastest rate since 2008, rising 0.5 percent in July and by 5.4 percent
Durable Goods Orders: New orders of goods designed to last three years or more declined 0.1 percent in July, dragged down
by a nearly 50 percent drop in nondefense aircraft and parts.21
Minutes from the July 27-28 FOMC meeting revealed that some appeared ready to slow the pace of monthly bond purchases
by the end of the year.22
“Various participants commented that economic and financial conditions would likely warrant a reduction in coming months,”
according to the minutes.
“Several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early
next year because they saw prevailing conditions in the labor market as not being close to meeting the Committee’s ‘substantial
further progress’ standard or because of uncertainty about the degree of progress toward the price-stability goal.”23
Sources: Yahoo Finance, August 31, 2021.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.
T H E M O N T H L Y R I D D L E
What do the words Potato, Voodoo, Grammar, Revive and Banana have in common?
LAST MONTH’S RIDDLE: An auto dealership sold 150 cars in a special 6-day tent sale offer. Each day the dealership sold 6 more cars than the day before. How many cars were sold on the 6th day?
ANSWER: 40 cars. On the first day, the company sold x cars. On the second day, x + 6, on the third day, x + 12, on the fourth day, x + 18, on the fifth day, x + 24, and on the sixth day, x + 30. If you add all the days together you get the equation: x + (x + 6) + (x + 12) + (x + 18) + (x + 24) + (x + 30) = 150 cars sold. 6x + 90 = 150 and so x = 10. So, on day 6 (x + 30) = 40.
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prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted
stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprising 50
companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes
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Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency
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1. WSJ.com, August 31, 2021
2. Twitter.com/EarningsScout, August 26, 2021. 490 companies S&P 500 companies reported through August 26.
3. WSJ.com, August 26, 2021
4. WSJ.com, August 27, 2021
5. CDC.gov, August 27, 2021
6. Sectorspdr.com, August 31, 2021
7. Reuters.com, August 9, 2021
8. WSJ.com, August 11, 2021
9. WSJ.com, August 27, 2021
10. MSCI.com, August 31, 2021
11. MSCI.com, August 31, 2021
12. MSCI.com, August 31, 2021
13. CNBC.com, August 26, 2021
14. WSJ.com, August 6, 2021
15. WSJ.com, August 17, 2021
16. MarketWatch.com, August 17, 2021
17. Bloomberg.com, August 18, 2021
18. WSJ.com, August 23, 2021
19. Bloomberg.com, August 24, 2021
20. WSJ.com, August 11, 2021
21. WSJ.com, August 25, 2021
22. WSJ.com, August 18, 2021
23. FederalReserve.gov, July 28, 2021