PAS Weekly Commentary

Sloppy Week Ends in Record Highs

The S&P 500 (+0.4%), Dow Jones Industrial Average (+0.2%), and Nasdaq Composite (+0.4%) eked out small gains and ended the week in record territory. The small‐cap Russell 2000 struggled this week and declined 1.1%.

The trading week was shortened to four days in observance for July 4th on Monday, so the week's action started on Tuesday when the S&P 500 snapped a streak of seven straight record closes. Reportedly, investors were worried about peak growth concerns due to a deceleration in the June ISM Non‐Manufacturing Index and the spread of the Delta Covid variant.

The next day featured a mega‐cap driven advance before the peak growth narrative again resurfaced as an excuse to do some selling on Thursday. The biggest source of angst was out of the Treasury market after the 10‐yr yield traded as low as 1.25% in part due to short‐covering activity since many people had been calling for yields to go up and not down.

To be fair, growth concerns seemed legitimate on Thursday after Japan extended its coronavirus state of emergency through Aug. 22 (barring spectators from the Olympics), and reports indicated the People's Bank of China (PBOC) could soon cut the required reserve ratio for banks due to slower growth expectations. The PBOC did just that by 50 bps on Friday.

Stocks and Treasury yields recovered a bit on Thursday and continued their rebound bids on Friday, with some attributing technical factors and a buy‐the‐dip mindset for the resilient price action. At the end of the sloppy week, the growth stocks stood atop the leaderboard while the cyclical stocks generally lagged.

The S&P 500 consumer discretionary (+1.5%) and real estate (+2.6%) sectors finished with strong gains and were the only sectors that rose more than 1.0%. Conversely, the energy (‐3.4%), communication services (‐0.4%), and financials (‐0.6%) sectors were the only sectors that closed lower.

Interestingly, WTI futures briefly hit a six‐year high above $76 per barrel after OPEC+ was unable to agree to further production increases. On a related note, the EIA reported its seventh‐straight weekly inventory draw.

The 10‐yr yield ended the week at 1.36%, or seven basis points below last Friday's settlement.

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Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2021 – 123842 (Exp. 10/21)