September 2021 Market Update

Bucking the historical seasonal trend, August was yet another solid month for the bulls. Over the course of the month, the S&P 500 tacked on 2.90%, the Nasdaq 100 added 4.16%, and the Dow Jones Industrial Average gained 1.22%.

Bullish Employment Data

The month of August started with a bang on the heels of bullish jobs data. Non-farm payroll data came in better than expected, with 943,000 jobs added versus market expectations of 840,000-850,0000. The news was the first jobs number to beat expectations since April 2nd, a welcome sign on the job front.

Inflation Picture Mixed

After the shine wore off on the bullish non-farm payroll data, monthly inflation data came through as a mixed picture. The consumer price index (CPI) reading was lower than previous readings, showing consumer inflation rising less than expectations. However, producer price index (PPI) data showed higher producer prices for the month.

PPI is often interpreted as a leading indicator of CPI, so the inflation picture was on the mixed side for the month. Broader markets seemed to digest the inflation data with ease.

Retail Sales, Afghanistan Developments, & Temporary Pullback

August did not pass without a mild pullback due to weaker than expected retail sales data and the developments in Afghanistan. The sell-off was only a minor two-day event, and broader markets began to resume their uptrend. The resilience of the S&P 500 for the majority of 2021 has been nothing short of astounding.

Jackson Hole and Interest Rates

The highly anticipated Jackson Hole Symposium was attended virtually, rather than in-person, this year. The annual event is watched heavily by market participants to gauge changes in the future direction of monetary policy.

Federal Reserve Board Chair Jerome Powell struck a dovish tone in the meeting and indicated that there would not be any significant changes in monetary policy in the coming weeks and months. This sentiment was what the bulls wanted to hear.

Chair Powell did indicate that there will be an eventual tapering of asset purchases by the Fed, but not immediately. The bulls loved the dovish tone combined with the lack of urgency, and the broader market indices continued their march higher through the end of August. Chair Powell reiterated that the recent ticks higher in inflation are “transitory” and that Fed policy is to deliver maximum employment combined with 2% long-term inflation.

August Takeaways

The continued theme of the “slow grind higher” prevailed in August, with just one minor pullback along the way. Inflation, employment, and Fed policy continue to be the key drivers in overall market confidence.