PAS Weekly Commentary

Third Quarter Begins with New Record Highs

This was an impressive week for the S&P 500, which gained 1.7%, extended its streak to seven straight record closes, and topped the 4300 level with ease.

The Nasdaq Composite outdid the benchmark index with a 1.9% gain and its own set of record‐setting performances.

The Dow Jones Industrial Average advanced 1.0% and closed at its first record high since May, while the Russell 2000 fell 1.2% amid rebalancing factors.

Interestingly, the Russell 1000 Growth Index rose 2.4% while the Russell 1000 Value Index (comprised of many cyclical stocks) increased just 0.4% despite a host of positive developments:

  • June nonfarm payrolls increased by 850,000 ( consensus of 680,000).
  • The June ISM Manufacturing Index checked in at 60.6% ( consensus 61.0%) for its 13th straight month above 50.0% (expansionary activity).
  • The Conference Board's Consumer Confidence Index for June was better‐than‐expected at 127.3 ( consensus 120.0).
  • Weekly initial claims declined to a post‐pandemic low of 364,000 ( consensus 400,000).
  • Many banks increased their dividend payments after easily passing the Fed's stress test in the prior week.

The employment report, however, wasn't as strong as the headline jobs figure initially suggested. The unemployment rate (5.9%), average hourly earnings (+0.3%), and the average workweek (34.7) missed expectations. In addition, the labor force participation rate (61.6%) was unchanged, and there were higher rates of unemployment for minority groups.

What's more, there were reported growth concerns linked to the spread of the Delta coronavirus variant and the restrictions several countries imposed to curb infections. On a related note, Johnson & Johnson (JNJ) said its COVID‐19 vaccine showed persistent activity against the Delta variant with long‐lasting durability of response.

These growth concerns were manifested in the 11‐basis‐point decline in the 10‐yr yield (1.43%), which acted as a tailwind for the growth stocks ‐‐ especially the mega‐caps. The Vanguard Mega Cap Growth ETF (MGK) rose 2.6% this week. Facebook (FB) reached a $1 trillion market capitalization, and NVIDIA (NVDA) reached a $500 billion market capitalization.

Separately, WTI crude futures topped $75 per barrel amid speculation that OPEC+ will agree to a smaller‐than‐expected increase in supply, starting in August. An agreement was supposed to be reached on Thursday, but the week ended without an agreement.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

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.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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2021 – 123623 (Exp. 10/21)