MARKET UPDATES
Thrivent Asset Management Contributors to this report: Steve Lowe, CFA, Chief Investment Strategist; John Groton, Jr., CFA, Director of Administration and Materials & Energy Research; Matthew Finn, CFA, Head of Equity Mutual Funds; and Jeff Branstad, CFA, Model Portfolio Manager
The stock market continued to set new highs in August amidst strong economic activity. The S&P 500® soared more than 20% through the first eight months of 2021, while the NASDAQ Index has jumped more than 18%.
Bond yields moved up modestly in August, while oil prices retreated following a sustained rally that was fueled by a recovery from the COVID-19 pandemic.
Manufacturing activity continued to grow at a healthy pace in August for the 15th consecutive month, according to the Manufacturing Purchase Managers Index report issued September 1 by the Institute for Supply Management (ISM). The six largest manufacturing industries all registered moderate to strong growth for the month, including computer and electronic products; fabricated metal products; chemical products; food, beverage and tobacco products; transportation equipment; and petroleum and coal products, in that order.
New orders also increased for the 15th consecutive month, according to the report, with all six of the largest manufacturing industries expanding “at strong levels.” Of the 18 manufacturing industries tracked by the index, 14 reported growth in new orders in August, and only one industry, nonmetallic mineral products, reported a decline in new orders.
However, manufacturers continue to struggle in two areas – hiring and supply delivery. Employers across nearly every industry reported difficulty filling open positions. They also reported that delivery of supplies continues to be slow, which has been an issue throughout the past few months. According to the report, “The index continues to reflect suppliers’ difficulties in meeting customer demand, including (1) ongoing hiring challenges, (2) extended raw materials lead times at lower tiers and stubbornly high prices, and (3) inconsistent transportation availability.”
Prices for raw materials increased for the 15th consecutive month, but at slower levels. Sixteen of the 18 industries reported paying higher prices for raw materials. However, according to the report, “supply and demand dynamics appear to be moving closer to equilibrium.”
The S&P 500 Index was up 2.90% for the month of August, from 4,395.26 at end of July to 4,522.68 at the August close. The total return of the S&P 500 (including dividends) was 3.04% for the month and 21.58% through the first eight months of 2021. (The S&P 500 is a market-cap-weighted index that represents the average performance of a group of 500 large capitalization stocks.)
The NASDAQ Index was up 4.00% for the month, from 14,672.68 at the end of July to 15,259.24 at the August close. Through the first eight months of 2021, the NASDAQ was up 18.40%. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)
Retail sales dropped 1.1% from the previous month in July, according to the Department of Commerce retail report issued August 17. But compared with one year ago – in the early months of the pandemic – sales were up 15.8%. Total sales for the three-month period of April through June were up 31.5% from the same period a year ago.
Auto sales were down 3.9% for the month of July – but up 15.7% from a year earlier. Building material sales were down 1.2% for the month, but up 7.5% from a year earlier; and department store sales were down 0.3% for the month, but up 24.3% from a year earlier. As shoppers return to brick-and-mortar stores, sales for non-store retailers (primarily online) have slipped, down 3.1% for the month, but still up 5.9% from a year earlier.
Restaurants and bars have continued a solid recovery – up 1.7% for the month and 38.4% from a year earlier.
The U.S. economy added 235,000 new jobs in August, sending the unemployment rate down 0.2%, from 5.4% to 5.2%, according to the Employment Situation Report issued September 3 by the Department of Labor (DOL). Average hourly earnings for all employees on private nonfarm payrolls rose by $0.17 to $30.73 in August.
In the week ending August 28, initial unemployment claims dropped to 340,000, which is the lowest level for initial claims since the beginning of the pandemic, March 14, 2020, according to the DOL. The 4-week moving average of 355,000 is also the lowest level since March 14, 2020.
The Financial sector of the S&P 500 was up 5.14% in August to lead all sectors, followed by Communications Services, up 5.01%, and Utilities, up 3.98%. Only one sector posted a loss for the month, Energy, which was down 2.04%.
The chart below shows the results of the 11 sectors for the past month and year-to-date:
Bond yields reversed course in August after a recent downward trend. The yield on 10-year U.S. Treasuries moved up from 1.23% at the July close to 1.30% at the end of August.
After a strong rally through the first six months of 2021 that coincided with the rise in global travel, oil prices dropped in August as OPEC increased output. The price of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, dropped 7.37% in August, from $73.95 at end of July to $68.50 at the August close.
International equities continued to edge up in August even as efforts to fight COVID-19 have stalled in some countries. The MSCI EAFE Index rose 1.52% for the month, from 2,321.09 at the end of July to 2,356.42 at the August close. Through the first eight months of 2021, the index was up 9.73%. (The MSCI EAFE tracks developed-economy stocks in Europe, Asia and Australia.)
Media contact: Samantha Mehrotra, 612-844-4197; samantha.mehrotra@thrivent.com
All information and representations herein are as of 09/07/2021, unless otherwise noted.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon, and risk tolerance.
Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.
Past performance is not necessarily indicative of future results.
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