FILTERS
Today’s Bond Blunder? Parking Too Much Money Short Term

Weekly Market Guide

  • 07.23.21
  • Markets & Investing
  • Commentary

Review the latest portfolio strategy commentary from Mike Gibbs, managing director of Equity Portfolio & Technical Strategy.

Short-Term Summary:

The week began with market volatility on rising Delta variant concerns, as the S&P 500 pulled back -1.6% on Monday in what was the 5th worst day of performance for the index this year. Additionally, the US 10-year Treasury yield moved sharply lower and reached an intraday low of 1.13%! However once again, the 50-day moving average acted as the technical backstop with the S&P 500 able to rebound from this level- a trend that has persisted since the positive vaccine news in November.

We are encouraged by elevated vaccination rates and low hospitalization rates here in the US, and see outsized risks more at the global level for equities. Our stance is that until a variant proves resistant to current vaccines, we think the waves of threat and corresponding market volatility (more specifically on "reopen areas") should be purchased. Fundamental trends remain strong with Q2 earnings season maintaining the trend of the past several quarters so far- that being historically elevated beat rates and earnings surprises. Credit spreads remain very narrow and low interest rates are broadly supportive of equity markets, though their volatility is expected to remain a key influence on sector and stock rotation beneath the surface.

Looking under the hood of the market, the stocks most levered to an economic reopening have been hit the hardest over the past several weeks as Delta variant concerns have risen. For example, these “reopen stocks” have sold off 14% on average since May. On the other hand, the “pandemic winners” (that had largely been taking a breather in the earlier part of the year as the reflation trade was gaining steam) have seen renewed strength of late- up 4% on average since May. We recommend a balance of these stocks within portfolios, but view the pullbacks in “reopen stocks” recently as opportunity to accumulate with new money.

Moreover, the small caps have generally been grinding sideways for the past several months, and reached short- term oversold levels in Monday’s weakness. The group was able to find support at the bottom-end of its recent range (and just above its 200 DMA), and rebound strongly- leading Tuesday’s rally on 95% advancing volume. Technically, sideways patterns following sharp upside moves (digestion periods) usually resolve themselves higher. Additionally, we note that the percentage of small cap stocks above their 50 DMA moved below 20% on Monday. This can often occur near lows historically, and typically leads to above average returns over the next 1, 3, 6, and 12 months. We remain positive on the small caps over the next 6-12 months, and would accumulate the group as they bounce from the lower end of their recent range.

View full PDF


IMPORTANT INVESTOR DISCLOSURES

This material is being provided for informational purposes only. Expressions of opinion are provided as of the date above and subject to change. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

Links to third-party websites are being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any third-party website or the collection or use of information regarding any websites users and/or members.

This report is provided to clients of Raymond James only for your personal, noncommercial use. Except as expressly authorized by Raymond James, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate, or commercially exploit the information contained in this report, in printed, electronic, or any other form, in any manner, without the prior express written consent of Raymond James. You also agree not to use the information provided in this report for any unlawful purpose. This report and its contents are the property of Raymond James and are protected by applicable copyright, trade secret, or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec. 501 et seq, provides for civil and criminal penalties for copyright infringement. No copyright claimed in incorporated U.S. government works.

Index Definitions

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market.

The MSCI World All Cap Index captures large, mid, small and micro-cap representation across 23 Developed Markets (DM) countries. With 11,732 constituents, the index is comprehensive, covering approximately 99% of the free float-adjusted market capitalization in each country.

MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 21 developed nations.

MSCI Emerging Markets Index is designed to measure equity market performance in 23 emerging market countries. The index's three largest industries are materials, energy, and banks.

Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.

International Disclosures

For clients in the United Kingdom:

For clients of Raymond James Financial International Limited (RJFI): This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended)or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not  intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Investment Services, Ltd.: This document is for the use of professional investment advisers and managers and is not intended for use by clients.

For clients in France:

This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in "Code Monetaire et Financier" and Reglement General de l'Autorite des marches Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Euro Equities: Raymond James Euro Equities is authorised and regulated by the Autorite de Controle Prudentiel et de Resolution and the Autorite des Marches Financiers.

For institutional clients in the European Economic rea (EE ) outside of the United Kingdom:

This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.

For Canadian clients:

This document is not prepared subject to Canadian disclosure requirements, unless a Canadian has contributed to the content of the document. In the case where there is Canadian contribution, the document meets all applicable IIROC disclosure requirements.

Broker Dealer Disclosures

Securities are: NOT Deposits • NOT Insured by FDIC or any other government agency • NOT GUARANTEED by the bank • Subject to risk and may lose value

Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James® is a registered trademark of Raymond James Financial, Inc.