Timely and Relevant News: Welcome to August!

Stocks gained again in July, with the S&P 500 Index now up six months in a row! We've highlighted a few data points below to keep in mind for the month of August:

August can be rough for stocks. Historically speaking, it is the second worst month of the year in a post-election year.
Right around the corner is September, which is the worst on average overall.
After a nearly 98% rally since the March 2020 lows and not even a 5% pullback since October 2020, investors should be very aware of the calendar.

U.S. Economic Data Recap

Energy Erupts: July was quite volatile for the energy sector as well as its commodity counterparts. Energy stocks have had a tremendous run since last fall. During June, the sector was up almost 47% for the year - nearly double the next best performing S&P 500 sector. In July, the sector managed to lose over 8% as the S&P 500 rose.

Natural gas had an excellent July, gaining over 7%. Spot prices reflect an increase in natural gas demand due to warmer than normal weather across the country. However, prices in the natural gas futures markets are signaling falling prices next year, possibly contributing to lower equity prices for oil and gas production companies.

Inflation: Consumer prices increased for the fourth straight month in June. The headline Consumer Price Index (CPI) annual rise was the largest increase in 13 years. Prices for used vehicles, hotels and restaurant meals were the largest drivers in June. Moreover, one major reason for the increase was the continued "base-effects" from the economic COVID-19 conditions last year. Removing volatile food and energy prices, the June Core Consumer Price Index increased 4.5% from June 2020, the largest increase since September 1991.

Retail Sales: Retail sales increased in June ahead of the Bloomberg consensus forecast and rose almost 20% vs. June 2020. These increases were broad based in 9 out of 13 categories. Sales growth was strong in department stores, clothing and restaurants.

U.S. Home Sales: Home sales in the U.S. reached a fourteen month low in June. Rising home prices and low inventory are driving potential buyers out of the market. In addition, builders have been constrained given higher lumber prices along with building material and labor shortages. Over 350,000 new homes were on the market in June, which was an increase of almost 20,000 more than in May.

Federal Reserve (Fed) News: After the Fed's July Federal Open Market Committee (FOMC) meeting, the decision was made to make no changes to current monetary policy. However, the Fed hinted that the economic recovery is progressing to a point where less monetary support will be needed.

U.S. Employment: The U.S. unemployment rate has declined substantially from last year’s peak. However, with an unemployment rate of 5.8% - the U.S. is still well off from full employment levels. Even as the economy reopens, the labor market slack needs to improve in order for the economy to reach full-employment.

Looking Ahead

We believe that inflation is mostly transitory and will stabilize once the economy completes its reopening, along with supply chains becoming fully operational and labor shortages easing. The major question is - how long will the “transitory” period last.

If you would like to learn more about what's happening in the economy or ask our team a question, we encourage you to register for our virtual 2021 Midyear Outlook on Thursday, August 12th at 4 pm ET.

If you have specific questions related to your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss further.

Disclosures:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All market and index data comes form FactSet and MarketWatch.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

This Research material was prepared by LPL Financial LLC