2Q’21: Where to From Here?
With record highs being recorded in US markets practically daily, how much more is left? With the S&P 500 up +14.4% for the first half of this year (vs. +16% last year), Nasdaq up 12+% (on top of last year’s 43% gain) and the Dow building on 2020’s 7% gain to climb another 12+%, investors are wondering where to from here.
In our view, the underlying fundamentals remain intact, despite valuations being a bit stretched. The Fed’s unrelenting commitment to keeping interest rates low for the foreseeable future, the ongoing fiscal stimulus with a pared down but still meaningful infrastructure bill likely soon, and some $4.5T in money market funds will keep the market awash with cash for some time to come. Stocks are cheap relative to bonds, which means continued asset re-allocation from bonds to stocks.
With vaccines becoming widespread, the economy has been re-opening with a vengeance. But with housing booming, retails sales strong, unemployment dropping, wages increasing and capital spending improving, fears that the Fed will eventually have to hike rates to stop inflation lurk in the background. The big jump in inflation numbers looks to be temporary, however: e.g., used car sales are a third of the CPI inflation index with new car sales and airlines tickets
another big chunk.
Unleashed and sudden demand after a year of COVID restrictions, on top of supply chain issues that are already abating (note, the free-fall in lumber prices), should normalize. Indeed, for the ten years prior to COVID, the Fed could barely reach and sustain its 2% inflation target; global supply chain efficiencies and technology disintermediation continue to keep prices of many goods and services low.
More than 80% of the 100 companies who have already reported this quarterly earnings season are beating estimates, but is this the peak? Maybe: which means stock picking and an emphasis on those companies with secular growth stories (think Alphabet, Facebook, Microsoft, PayPal) should continue to outperform.
With much of the developed world lagging behind the US in vaccines and COVID control, the staggered re-opening around the world as the vaccine rollout continues, bodes well for continued earnings growth, particularly from the multi-nationals.
We remain fully invested in stocks while closely monitoring and adjusting to the unique challenges of managing through an economic re-opening while the COVID pandemic continues.
At BD8 Capital Partners, we look for and invest in companies with long runways of growth, sustainable competitive advantages, strong balance sheets and seasoned management teams. We manage portfolio risk not only by our choice of companies in which to invest but in keeping positions sized to the risk/reward of each position and the entire portfolio. If you would like to discuss your financial planning needs, the health of your portfolios and
whether you are well positioned for what lies ahead, please feel free to contact us.
We hope you are enjoying these summer months wherever you may be.
Warmest regards,
Barbara
Barbara Doran
CEO CIO
bdoran@bd8cap.com
linkedin.com/in/barbara-doran-7aa248
https://twitter.com/barbara_doran1__
BD8 Capital Partners LLC
Cell: 917-733-7644
Fax: 917-580-6882
Nolen Howe (Client Service Associate)
nhowe@bd8cap.com
Office: 332-220-3922
The content of this article is for informational purposes only and should not be considered a recommendation of any particular security, strategy, investment product or investing advice of any kind. There are risks associated with investing, including the entire loss of principal invested. Past performance does not guarantee future results. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions of Spire Wealth Management, LLC, Spire Securities, LLC or its affiliates. Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company, Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.