July 2021 Market Update

Major market indices enjoyed a fruitful June, with the S&P 500 tacking on 2.22%, the Nasdaq 100 adding 6.34%, and the Dow Jones Industrial Average finishing the month just about even–only down 0.08% on the month.

Finally, a Bullish Job Number

It’s been a while since we received a constructive monthly jobs number via the Non-Farm Payroll data. In reality, the last time one was printed was on April 2nd, 2021. On Friday, July 2nd, jobs data came in better than expected, with 850K jobs added versus the 700K that were expected during the month of June.

The jobs data was a welcome boon for market participants as jobs have been heavily in focus. In response, the major U.S. indices rallied on Friday, July 2nd, in pre-holiday weekend-style trade. The employment data was a refreshment and hopefully a sign of things to come for the U.S. economy post-pandemic and throughout the month of July.

As we near the end of the month, we are having some market-moving events. Likely the biggest of these events has already occurred. The CPI (Consumer Price Index) reading on July 13th revealed that inflation was once again much higher than market estimates, with the data showing 0.9% versus 0.5% expected. The most recent data shows the highest rate of inflation in 30 years by some measures. Following the release of that data, the major indices fell through the end of the week.

Next up, we will hear from the Federal Reserve on July 28th with more communication on monetary policy. Wall Street will be analyzing every word from the Fed to get a sense of any interest rate stance changes, especially given June’s surprising guidance for higher interest rates in 2023.

Interest Rate Hike Potential Shaken Off

In case you missed it, the markets were recently shaken (but not stirred) by the potential rise in interest rates in early 2023. The announcement of higher interest rate guidance seemed to come as a shock to many market participants.

In a truly healthy economy, rates should not be this low. While the announcement may have been unwelcome news for some, I believe most market participants knew it was coming sooner or later. For now, it seems like the almighty bullish employment data released on July 2nd has negated any effects of a potential interest rate hike in 2023.

The Summer Stock Market

Historically, the market is a bit softer during the summer months, though there’s always the possibility that this year could be the exception. The market is looking for continued solid jobs data and some news on the inflation front.