TrustWell’s Quarterly Market Review: Q2 2021
The Roth Conversion “Golden Window”
June 1, 2021
Keeping Your SSN Confidential
August 1, 2021
By Brett Freese
Market Highlights:
- Stocks had a great 2nd quarter. In a reversal of the 1st quarter’s “Value Stock” leadership growth stocks outperformed value stocks in the 2nd US Large Cap stocks outperformed US Small Cap. Additionally, World Small & World Mid Cap outperformed International Developed Markets since the start of 2021.
- Corporate Bonds, Municipal Bonds, and World Bonds indices were all positive (see Market Scorecard) even with inflation rising. However, Short-Term Government Treasuries were down slightly for the quarter.
- Gold was up 3.63% price per ounce for the last 90 days.
Economic Notes:
- According to the financial markets the world is clearly in recovery mode from the virus shutdown and challenges.
- The “growth is dead” statement from “investment experts” got this past quarter very wrong. Good reason to stay diversified even in the wake of what “emotional money” is doing. That does not mean having a strategy based on current economic conditions and fundaments does not have value, but that wise diversification works over time.
- Unemployment numbers continue to improve. In fact, getting enough workers has been a struggle in many industries this past quarter.
- The Federal Reserve kept the Federal Funds rate target range to a historic low of 0.00 – 0.25% and have stated that they are willing to tolerate above target inflation for longer to make sure the economy improves. Note: The Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment. Clearly leaning towards the latter at this point in time.
- Core inflation remaining under control below 2% is now in question. This is important to continue to watch.
- The unprecedented spending in Washington will have long lasting effects on the borrowing cost of the US Government.
- As the financial markets anticipate economic trade to recover, we will likely face a steepening yield curve increasing the challenges to fixed income investing and a need to be more strategic in choosing wisely where in the equity markets to invest. In light of rising inflation and interest rates a careful investment strategy is warranted.
Historical Stock Market Declines:
Market declines and inclines rarely look the same or even feel the same, but they do happen and the ups and downs are a part of the process – It is important to have a plan/strategy so emotions don’t dictate buying or selling.
A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years
Please know that when stock prices go down the “market collapse gurus” receive the most air time. Likewise, when stock prices go up all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.
Market Scorecard for the last 13 weeks ending 06/30/2021:
US Equities:
+8.47% S&P 500 (Index of the largest US publicly traded companies)
+7.23% Russell 2000 (Index of 2000 Small-cap US publicly traded companies)
Global Equities:
+5.37% Foreign Large – Morningstar Category
+6.69% World Small/Mid Stock – Morningstar Category
US Bonds:
+3.03% Corporate Bond – Morningstar Category
-0.02% Short Government – Morningstar Category
+1.47% Muni National Bond Index – Morningstar Category
Other:
+1.05% World Bond – Morningstar Category
+3.63% LBMA Gold Price
Market Indicators:
Inflation:
4.16% as of 05/14/21 (Up 2.48% from 1.68% in February 2021)
Unemployment:
5.8% as of 06/04/21 (Down from 6.20% in February 2021)
Fed Funds Target Rate:
0.00 -0.25% as of 06/28/21 (Same as 03/26/21 of 0.00 – 0.25%)
Suggested Next Steps:
- Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. The ups and downs of investments many times seem to make sense only after they happen, however, market prediction is very difficult. (i.e. the next stock market crash has been predicted every year since 2008).
- Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
- Your investment allocation and diversification are important factors in both risk management and future returns. Therefore, if you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor(s).
