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July Market Review Thumbnail

July Market Review

Markets Gain Despite Volatility Sparked by COVID-19 Delta Variant

The stock market continued to grind higher in July, rising 2.4% for a year-to-date total of 18.0%. July’s gains occurred despite increased volatility related to a resurgence of COVID-19 cases in the U.S. and renewed talks of mask mandates and lockdowns.

What Worked and What Didn't Work

July’s gains were not completely broad-based, as riskier asset classes underperformed amid the increased volatility.  Energy, Financials, and Small Cap stocks (Russell 2000) all produced negative returns on the month. However, in a show of market resiliency, all other sectors within the S&P 500 gained during July.  Leaders included Healthcare, Technology, Real Estate, and Utilities, all of which returned approximately 4% or more.  While the rise in COVID-19 cases looks daunting for the coming month, investors are using countries like the United Kingdom and India as proxies for the U.S. surge.  Both of those countries saw a Delta variant COVID-19 surge lasting for approximately 50 days (Johns Hopkins, Fundstrat), implying the U.S. could already be more than halfway through the current spike.

What We're Watching

 In the coming months, a confluence of macro-economic events will likely dictate market performance.  COVID-19 will continue to have an outsized impact on the stock market, and any prolonged surge will have negative economic consequences. In the event of such a surge, we expect the U.S. Federal Reserve to provide further market support by keeping interests rates lower for longer.  We also expect politics to garner headlines, as Congress is set to debate a non-partisan $3.5 trillion budget for the coming fiscal year, while trying to advance an Infrastructure bill that has received bi-partisan support in the Senate.  All in all, we continue to believe the positives outweigh the negatives and that buyers will stand ready for any significant pullbacks.

We hope that you enjoy the rest of your summer while staying healthy and safe.

Important Disclosures: Past Performance is no guarantee of future results.  All investments carry some level of risk. The S&P 500 Index is an unmanaged, market capitalization weighted index of 500 common stocks widely regarded to be representative of the US market in general. Russell 2000® Index (U.S. Small Caps): Measures the performance of the 2,000 smallest companies in the Russell 3000®Index, which represent approximately 10% of the total market capitalization of the Russell 3000® Index. Russell Midcap® Index: Measures the performance of the 800 smallest companies of the Russell 1000® Index, which represents approximately 36% of the total capitalization of the Russell 1000® Index which is a mid‐cap index.  MSCI EAFE Index: Measures the equity market performance of developed markets outside of the U.S. & Canada.  MSCI EM Index: Captures large and mid cap representation across 24 Emerging Markets countries and covers approximately 85% of the free float-adjusted market capitalization in each country. Barclays Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Indices are unmanaged and direct investment is not possible.  The opinions expressed are those of the author and not necessarily those of Robert W. Baird & Co. Incorporated.