Anna Rathbun, Chief Investment Officer

ThroughoutAugust, concerns about the pace of growth for the global economy dominated theheadlines. In the U.S., the shortages from the supply chain issues were at theforefront of producers’ concerns and their ability to meet future consumerdemand. Consumers, on the other hand, shied away from retail spending, drivenby falling motor vehicle purchases. As it turns out, Americans are not spendingall the savings they accumulated during 2020; instead, they are rotating theirdiscretionary income from goods spending into services spending. As the U.S.’seconomy is about 70% consumption, muted spending by Americans has a huge impacton growth expectations. Still, the recovery continued its progress, even ifmixed, with the initial jobless claims trending downward and implying apositive direction for labor. Consistent with the second quarter trend, itseems that the month of August was another step toward revising growthexpectations downward.


  • The major indicesin the U.S. continued to climb during August, hitting multiple highs along theway, however the reflation trade continued its deflationary trend in August.
  • Cyclicallyoriented small cap stocks underperformed the S&P 500, and value-orientedstocks also underperformed.
  • From a sectorperspective, the Energy sector notably dragged on performance, but the Tech andCommunication Services sectors continued to charge ahead, leading the growthstocks for the month.
  • The Delta variantis showing some influence on the economic fundamentals, however despite theconcerns around the Delta variant, corporate performance has been good, andpositive guidance has meant improvement in the valuation figures.
  • On theinternational front, the MSCI EAFE Index registered positive returns, althoughthe gains were damped by the strengthening of the U.S. dollar for U.S.-basedinvestors. Japan continued to outperform Europe.
  • In emergingmarkets, China continued to be a source of volatility, but the late monthrecovery of its equity market helped MSCI EM to surge ahead. India’s stellarperformance of +10.9% and a modest currency tailwind also aided in emergingmarket equity returns.
  • In the fixedincome markets, the flattening of the U.S. Treasury curve seen over the lastfew months took a pause during August. We saw a steepening of the curve, but thecurve actually flattened after the details of tapering intentions were revealedin the Fed’s July meeting minutes and in Chairman Powell’s speech at theJackson Hole Symposium.
  • The doubts aboutthe reflation of the economy that bled into the credit markets in July extendedinto a good part of August. However, the bullish momentum that pushed equitymarkets to multiple highs eventually helped credit spreads to recover.

Looking Ahead

At any given time, the economy may send us conflicting signals,and reopening from a pandemic is not proving to be an exception. Driving theuncertainty ahead, not just for this fall, but most likely into 2022 is thereality that COVID-19 is here to stay, whether in the form of the Delta variantor other versions of SARS-Co-V-2. As stated in the previous letter, the risk tothe economy is not COVID-19 itself but our reaction to it, both in individualdecisions and in policies of public and private institutions. Beyond thesummer, we also expect to hear more noises from Washington as our lawmakersdebate the details of funding the infrastructure bill, and the seeminglyattached debt-ceiling discussion. There are also geopolitical concerns, asGermany embarks on its election cycle, and investors may see more surprisesfrom the Chinese government crackdowns. As we close out the summer of 2021, itwould be reasonable to expect some volatility ahead.

More Information

For more information on the August financial market activity, please contact CBIZ Investment Advisory Services.

The information included in this update is provided for informational purposes only and should not be construed as investment advice. The views expressed are those of the author based on the data available when this update was written and are subject to change based on market conditions or other factors. CBIZ Investment Advisory Services disclaims any liability for any direct or incidental loss incurred by applying information supplied in this update.

Investment advisory services provided through CBIZ Investment Advisory Services, LLC, a registered investment adviser and a wholly owned subsidiary of CBIZ, Inc.

Published on September 01, 2021