Market Update
Published July 2021
The reopening, cyclical, value, inflationary, and dividend trades proved to be the most profitable in the first half of the year. Energy did the best at 45.6%, financials were up 25.6%, and real estate was up 23.3%. Those sectors were the worst performers during Covid last year, so it makes sense they are rebounding well. We have positioned most portfolios to participate in this cyclical reopening improvement. Of late, with the Delta Covid variant increasingly causing issues, the stocks that did well during Covid have improved at the expense of the reopening sectors. This is a story that can go on for a long time…that is, reopening stocks do well every time Covid numbers decline, and decline every time Covid numbers increase. For now, all we can do is rely on facts (imagine that). The Wall Street Journal published an article on July 15 that said 99% of all hospitalizations for Covid-19 are among unvaccinated people. New studies from the U.K. and Canada show up to 87% vaccine effectiveness against symptomatic infection with the Delta variant. Though controversial, the stock market case is clear to my analytic mind. If national vaccination numbers stay near 50%, we may continue to have these situations where Covid numbers spike, and the economy and the market takes a dip - hopefully temporarily!
Our largest concern for retired investors continues to be inflation. Though the Federal Reserve is staying with their opinion that inflation is temporary, we disagree and remain on edge about the havoc that inflation can have on long-term retirement scenarios. The only way to historically deal with inflation is to remain invested in sectors that benefit from inflationary pressures. We remain favorably invested in those areas, including financials, commodity-based stocks, and small cap value ETFs.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional adviser should be consulted before implementing any of the strategies or options presented.
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